Fundamentals

The British pound moved higher vis--vis the U.S. dollar today as cable tested offers around the US$ 1.7655 level and was supported around the $1.7320 level. Bank of England reported it will hold two forward auctions in U.S. dollars with the Federal Reserve to provide extra liquidity during the year-end period. BoE will advise on timing and amounts in short order. Currently, the central bank is conducting US$ 70 billion in dollar liquidity auctions through its swap facility with the Fed. The U.K. government is said to be discussing an injection of capital with U.K. banks. Many traders expect Bank of England will cut its headline repo rate by 50bps on Thursday. Data released in the U.K. today saw August manufacturing production fall 0.4% m/m and 1.9% y/y. Cable bids are cited around the $1.7045 level. The euro moved higher vis--vis the British pound as the single currency tested offers around the ₤0.7810 level and was supported around the ₤0.7710 level.