UK employment data produced mixed results with the claimant count rising to 8.2K vs. 3.3K projected, the eight consecutive monthly rise. GBP/USD meanwhile tried to stabilize around the 1.7400 figure as the data contained some good news as well, namely that average earnings ex-bonus rose by better than expected 4.0% on a year over year basis. Overall, at 4.7%, the UK economy still maintains one of the lowest unemployment rates in G-7  universe second only to Japan's 4.3% rate.

The battle for the economic future of England is being fought between British Retail Consortium and the Bank of England with the former demanding lower rates to stimulate consumer demand and the latter maintaining a hawkish stance as concerns mount over escalating inflation. For the time being the BOE appears to have the upper hand as UK eco data though hardly robust, appears to have stabilized providing cover for the Central Bank to keep rates steady. 

Meanwhile in Europe, inflation in Germany rose at the fastest pace in four years as surging oil prices have made their way through the supply chain. The EUR/USD traded back to the 1.2000 figure after reaching 1.1952 * a weekly low earlier in the session. Although many analysts forecast further downside for the European currency, weighed down by anemic growth and persistent political problems, we feel the much more likely scenario will be a mind numbingly boring range as neither the euro not the greenback will offer strong fundamental reasons to be bullish for the long term. In fact with the US Trade Balance figures due out this Thursday and the EUR/USD at the bottom of its recent range the risks are stacked decidedly against solar bulls unless the trade data contains a major positive surprise.

Boris Schlossberg is a Senior Currency Strategist at FXCM.