The greenback relinquished some of its gains against the euro, slipping toward the 1.4780-region in early morning trading. There was little US economic data for traders to digest with focus shifting to Thursday's weekly jobless claims and trade deficit figures.
JPY Shrugs off Soft Data
The yen firmed against the majors, rising to 87.38 versus the dollar and to 128.81 against the euro as risk aversion continues to be the driving force behind the currency's direction. Japan downwardly revised its Q3 GDP report by more than consensus estimates, which had forecast the revision to 0.6%, instead revealing its economic growth had slowed to 0.3% versus the previously reported reading of 1.2%. On an annualized basis, the revised Q3 GDP was trimmed to 1.3%, falling by more than expected from the 4.8% reported in the preliminary reading. According to Japan's Cabinet Office, the downward revision was the largest since 2002 and raises doubt over the sustainability of Japan's economic recovery.
USDJPY hovers just beneath the 88-level, with support eyed at 87.40, followed by 87 and 86.60. Subsequent floors are seen at 86.20, backed by 86 and 85.50. On the upside, resistance starts at 88.30, followed by 88.65 and 89. Additional gains will encounter ceilings at 89.40, backed by 89.70 and 90.
Sterling's Woes Continue
The British pound slumped to a near 8-week low beneath the 1.62-level to 1.6170 amid lingering concerns over the deteriorating fiscal conditions in the UK. In UK Finance Minister Darling's pre-budget report to Parliament, he said that he expects the net debt to reach 56% of GDP in 2009/2010 and for it to peak in 2014/2015. He also reiterated the UK economy's growth rate of 1 to 1.5% and that he expects the economy to slump by 4.75% in 2009, worst than the initial 3.25 to 3.75% decline previously estimated.
The markets will look ahead to the Bank of England's monetary policy decision due out Thursday morning. The BoE is widely anticipated to leave rates unchanged at 0.5% and also maintain its current program of bond purchases.
Cable has rebounded somewhat in the New York session, stabilizing near the 1.6250-level. Resistance is seen at 1.6270, followed by 1.63 and 1.6350. Additional ceilings are eyed at 1.6380, backed by 1.64 and 1.6440. On the downside, support starts at 1.62, followed by 1.6170 and 1.6130. Subsequent floors are eyed at 1.61, backed by 1.6065 and 1.6030.