SereneLoi.com

US Session: Sterling Suffers On Dollar Rebound

There have been very few newsworthy events in today’s session, and even the handful of scheduled speakers lined up had very little effect on FX markets. The only driver therefore has been the performance of global equity markets; and with both European and US indices in negative territory, the USD has been able to make gains across the board. The hardest hit has been GBP which has tumbled over 200 pips today from its opening levels around 1.6670 to touch a low of 1.6461. Strong demand in EURGBP has been apparent throughout the session, but besides that there have not been any significant headlines to induce such a fall. One possibility may be that in the absence of any data today, markets have been looking ahead to next week’s events; in particular BoE King and MPC members testifying about the November Inflation Report on Tuesday. It is expected that policymakers will clarify their stance on the QE programme remains flexible and that all tools, including a future cut in deposit rates, remain on the table. Any further expansion of QE or reduction in interest rates would be strongly GBP negative, and the explicit suggestion of either remains a very real threat at this event.

Commodities are having a mixed day; with crude down around a percent at $76.60 but gold holding up relatively well at $1142 levels. We expect a period of consolidation in gold prices after the steep rally we’ve had over the past few weeks, and for the moment $1125-30 seems to be populated with good bids. Some offers wait just ahead of $1150, so for now gold, like many other major currencies, seems destined for range-bound trading ahead of a decisive break out in the USD.

#