The dollar edged higher against the euro and sterling amid a dearth of US economic reports and declines in the global equity bourses and further retreat in the price of spot gold. Amid renewed fears over deteriorating credit ratings in both the US and UK and Greece's credit downgrade by Fitch ratings, traders shifted back into risk-averse assets, benefiting the greenback and the yen.
The Bank of Canada, as expected, left monetary policy unchanged at 0.25%. In the accompanying policy statement, the BoC reiterated its conditional commitment to hold current policy rate until the end of the second quarter of 2010. Moreover, the Bank said the underlying macroeconomic risks to the projection are roughly balanced, with the overall risks to its inflation projection still tilted slightly to the downside.
Sterling Slumps on Data
The British pound came under heavy selling pressure in the Tuesday session, sliding below the 1.63-level against the dollar to 1.6258 and falling past the 144-handle versus the yen to 143.64. A combination of weak economic data and a Moody's report highlighting the deteriorating public finances of the UK weighed on the sterling, dragging it lower against the majors.
The economic reports released overnight missed consensus estimates. Manufacturing production in October fell by 7.8%, missing calls for a decline of 7.2% versus a 9.3% slide in the previous year, while posting a flat reading on a monthly basis and falling short of estimates for a 0.4% increase from 1.7% in the previous month. Industrial production also fared poorly, with the October readings at 0.0% m/m and -8.4% y/y - both worse than forecasts.
Credit rating agency, Moody's said the US and UK's top debt ratings may no longer be Aaa, labeling them as resilient versus resistant. Moreover, traders will turn to the UK Treasury's pre-budget report due out on Wednesday and the Bank of England's monetary policy announcement on Thursday morning.
Cable remains mired beneath the 1.63-figure, trading near 1.6280 with interim support starting at 1.6250, followed by 1.6220 and 1.62. Subsequent floors are seen at 1.6160, backed by 1.6130 and 1.61. On the upside, resistance starts at 1.63, followed by 1.6340 and 1.6380. Additional ceilings will emerge at 1.64, backed by 1.6450 and 1.65.