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James Hyerczyk

The EUR/USD traded lower on Wednesday and is now in a position to challenge last week’s low at 1.0896. The Euro weakened against the U.S. Dollar as expectations rose for a hike in U.S. interest rates and after European Central Bank President Mario Draghi reiterated in a speech early in the session that the central bank was poised to make more interest rate cuts and implement other forms of monetary easing, including expanding and extending its current 1.1 trillion Euro stimulus program.

The GBP/USD finished lower on Wednesday as investors continued to adjust positions ahead of tomorrow’s Bank of England monetary policy committee meeting. Trader also expect the BoE to leave interest rates at current historically low levels.

However, investors should look for increased volatility on Thursday because the central bank is also expected to release its update quarterly Inflation report. BoE Governor Mark Carney is also scheduled to speak. He is expected to continue to prepare businesses and households for higher borrowing costs.

In other news, the U.K. Services PMI beat the estimate with a 54.9 reading. The estimate was 54.6. Last month’s report showed a reading of 53.3.

December Comex Gold posted a slight increase after yesterday’s sharp sell-off. This could be a sign that sellers may have exhausted themselves as they prepare for Friday’s U.S. Non-Farm Payrolls report. Volume and volatility are also below average today.

December Crude Oil is up slightly, shortly before today’s U.S. Energy Information Administration’s weekly inventories report. Traders are looking for the report to show a 2.5 million barrel inventory build.

Late Tuesday, industry group the American Petroleum Institute reported that crude oil stocks rose by an estimated 2.8 million barrels in the week ended October 30. Total inventories are now at 479.9 million barrels.

Prices are also getting support from a U.S. pipeline outage, a strike at Brazil’s state oil producer and the closure of the Libyan oil export terminal. U.S. Colonial Pipeline suspended operations due to flooding and the Petrobras strike has slowed daily oil output by about 25 percent.

In other U.S. news, traders are bracing for comments from FOMC Member William Dudley at 2:30 p.m. ET and FOMC Member Stanley Fischer at 7:30 p.m. ET. Investors will be looking for guidance as to the timing of the next Fed rate hike. At 10 a.m. ET, Fed Chair Janet Yellen testifies before the House Financial Services Committee on bank regulation and supervision. She is not expected to talk about the economy.

Earlier today, the ADP private sector employment report showed companies added 182,000 jobs in October. Traders were looking for a reading of 190K. The government also reported that September’s trade deficit came in at $40.8 billion, its lowest level in seven months.

The Final Services PMI report is expected to show a reading of 54.6 versus 54.4 last month. ISM Non-Manufacturing PMI should come out at 56.6, slightly lower than last month’s 56.9 reading. 

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