Dollar and yen continue to stay in tight range as stocks and commodities consolidate. Sterling is one of the worst performers today after disappointment from consumer confidence data as well as concern that Abu Dhabi will probably insist on Dubai, which has significant holdings in UK real estate and the share market, selling some UK assets as part of its conditions for rescuing the emirate. Canadian dollar is still steady despite weaker than expected GDP report. Yen is also staying in tight range.

Canadian Q3 GDP turned positive to 0.4% annualized but fell short of expectation of 1.0%. IPPI unexpectedly dropped -0.3% mom in Oct while RMPI rose 2.5% mom. US Chicago PMI rose to 56.1 in November versus expectation of a fall to 53.0. Eurozone CPI turned positive to 0.6% yoy in November versus consensus of 0.6%. Japanese manufacturing PMI dropped to 52.3 in November. Industrial production rose less than expected by 0.5% mom in October. Housing starts dropped less than expected by -27.1% yoy in October. UK Gfk consumer confidence unexpectedly deteriorated from -13 to -17 in November.

BoJ Governor Shirakawa said today that they bank is paying due attention to the effects of the recent rapid appreciation of the yen on business sentiment. Also, he reemphasized that BoJ will act promptly and decisively if judged necessary to ensure the stability of financial markets. Over the weekend, Prime Minister Hatoyama ordered cabinet ministers to include in a supplementary budget for fiscal 2009 measures aimed at coping with the surging yen and declining Japanese stocks. There will also be a meeting between Shirakawa and Hatoyama as early as Wednesday for a discussion on risks to the fragile recovery in the Japan economy. But after all, yen pays little attention to the rhetoric and remains steady in range.

RBA rate decision will be the main focus in the coming Asian session. We anticipate the RBA will hike its policy rate by 25 bps for the third consecutive month to 3.75%. While policymakers may have concerns about exchange rate as rate hike in Australia has already outpaced most of other countries, recent encouraging economic development and RBA's forecasts suggest the central bank should not pause in December, particularly when there's no meeting scheduled in January. More in To Raise or To Pause, RBA at a Crossroad

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.6333; (P) 1.6426; (R1) 1.6582; More

GBP/USD's break of 1.6459 minor support argues that recovery from 1.6271 might has completed at 1.6591 after hitting 4 hours 55 EMA. Intraday bias is flipped back to the downside for support zone of 1.6250/71. As noted before, break there will confirm the bearish case that rebound from 1.5706 has completed already and will target a retest of this resistance next. On the upside, above 1.6591 will bring more recovery but after all, upside is still expected to be limited below 1.6744 resistance to bring resumption of fall fro 1.6875. However, a break above 1.6744 will invalidate our view and turn focus back to 1.6875/7043 resistance zone.

In the bigger picture, current development shifts favors back to the case that medium term rebound from 1.3503, which is is treated as a correction to down trend from 2.1161, has completed at 1.7043. Focus now turns to 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) for confirmation. Break there will argue that whole down trend form 2.1161 is likely resuming for a new low below 1.3503. On the upside, however, break of 1.7043 will indicate that rise from 1.3503 is still in progress to resistance zone of 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.

GBP/USD