What a day for the pound Wednesday is turning out to be, as the currency has been trading like a rollercoaster since early European opening. Traders were positioned negatively before the release of the annual budget statement by Chancellor Darling and although we saw a brief retracement on GBP/USD above 1.4630, the move was completely reversed, after it became clear that the recession is deepening and the deficit may be reaching new record highs€¦
The GBP/USD has found resistance at 1.4630 for now and the fact that psychological and important level of 1.45 made a clear breakout on the downside gives traders more excuse to continue the recent slide towards 1.44. Next level to watch is 1.4420 ahead of 1.4370. At the moment of writing the pair is trading heavily and with choppy action and a daily close below 1.45 may put further pressure in the coming days towards 1.41 once again.
The economic calendar had a few releases during the day, with BOE minutes from the last monetary meeting, which showed that all members were in favor of keeping the rates unchanged and keep buying government bonds with printed money in order to save the economy from further deterioration. The event of the day though was the annual budget release, which basically said that the economy may start to recover at the end of this year, however the UK government may borrow even more money than originally planned, in order to tackle the economic crisis and as a result the national debt may rise to new record highs. The pound felt the wrath of traders as it fell against its major counterparts and GBP/USD now is in danger of further deterioration in the coming days, as long as 1.4630 remains resistance.
Later on today, we have Treasury Geithner speaking again about efforts to revive the current economic crisis and the markets may listen once again as to what the next step is. Yesterday, Geithner said that the banks in US are well supported and stocks went up as a result, however come today and risk aversion is once again back, as banks continue to post bigger losses than initially projected, with latest one being Morgan Stanley and therefore the positive sentiment is being put to the test once again.
For now, things to watch are gold rising, which is visible once again, and the correlation it has with futures and equities, as it always manage to find buyers when the market sentiment is low. Also, the euro rising against the dollar after the pair broke important resistance at 1.30. Next level to watch is 1.3070. A daily close above 1.30 may give euro bulls more reasons to fight back€¦