Market Brief

GBP has taken a considerable beating today compared with its major peers despite a surprise drop in ILO Unemployment rate to 7.8% (8.0% expected, 7.9% last), and the BoE’s Quarterly Inflation Report which upgraded growth forecasts modestly and indicated inflation was set to rise sharply in the short term. GBPUSD was trading around 1.6750 before the release but rapidly plunged down to 1.6650 and continued to trade lower throughout the afternoon. The aggressive sell-off in GBP was attributed to Mervyn King’s comments that the committee “has a completely open mind as to whether to do more asset purchases or not”; jeopardizing theories that the extra GBP25bn pledged for asset purchases by the MPC last week would be the last. At the time of writing, GBPUSD had touched 1.6552 lows and dragged EURUSD down in sympathy to 1.4965 levels; but the choppy liquidity is unsurprising given the Veteran’s Day holiday in the US.

Aside from the BoE event, it has been a largely uneventful day’s trading; equity indices across Europe and the US (still open despite the public holiday) have continued their gradual ascent higher and gold has remained well supported above $1113.50 after touching new highs at $1118.65. Indeed, the momentum of risk appetite and associated USD-selling, coupled with today’s patchy liquidity was the only apparent driver that earlier impelled the DXY to fresh new lows at 74.78 – levels not seen since August 2008.

There should be a decent pick-up in market-moving data events in the coming sessions, beginning with New Zealand Retail Sales later this evening where markets are expecting a 0.4% gain in September after last month’s impressive 1.1% print. We will also get Australian Unemployment which is expected to tick up slightly to 5.8% after last month’s surprise drop. Both AUD and NZD are well off their lows after last week’s risk unwind but RSI indicators remain in benign territory around 50-60 so expect better-than-expected figures to prompt fresh demand for the high-yielders. Into tomorrow’s European session, expect the main events to be Swedish CPI and Eurozone Industrial Production, but as always, the intensity of risk sentiment is likely to be the dominant driver of most currency pairs.

Currency Tech

R 2: 1.5100
R 1: 1.5063
CURRENT: 1.4980
S 1: 1.4950
S 2: 1.4810

R 2: 1.7041
R 1: 1.6843
CURRENT: 1.6565
S 1: 1.6405
S 2: 1.6240

R 2: 92.50
R 1: 90.75
CURRENT: 89.90
S 1: 89.20
S 2: 88.85

R 2: 0.9475
R 1: 0.9330
CURRENT: 0.9290
S 1: 0.9195
S 2: 0.9090

R 2: 1.0780
R 1: 1.0608
CURRENT: 1.0460
S 1: 1.0430
S 2: 1.0380