A quiet trading day in Asia, encouraged by the public holiday in the US, has seen the pound strengthen against all the other majors.
- Latest measures of Australian inflation show a continued rise, increasing the chances of a rate rise early next month
- UK January house prices +0.4% and search activity on the rise: Rightmove
- BoJ’s Shirakawa: still need to fight deflation but global recovery becoming entrenched
- IMF chief warns that double-dip recession still possible
- Regional stockmarkets fall by over 1% on average
- Gold steady, oil falls another 1%
The first move of the day was down for the major pairings as dealers anticipated a day of risk-averse trading but despite falls on regional stock markets, this trend has been reversed as the day unfolded, led by solid demand for the GBP.
Cable fell to its session low just above 1.6250 in very early interbank trade but bounced quite sharply as strong demand for GBP/JPY emerged in early Tokyo. Selling of EUR/GBP also generated support for the pound with technical selling emerging from hedge fund players after the daily close below the important 200-day MA. Ranges: cable 1.6252-1.6318, EUR/GBP .8800/29, GBP/JPY 147.40/148.40.
EUR/USD has been fairly subdued in a 1.4336/77 range. Sentiment remains quite bearish and the talk in the market is of massive stops now building below the previous 1.4220 low. EU finance ministers will meet later today but no major announcements are expected.
USD/JPY has also had a quiet 90.73/99 range with volatility only emerging through flows in the crosses. AUD/JPY and EUR/JPY selling was outweighed by GBP/JPY buying with the net effect on USD/JPY of a small rise on the session.
AUD/USD fell early as stops below .9195 were triggered and dealers tried hard to get at bigger stops below .9170 but these attempts were stymied by some very strong bids. The .9170 level has now increased significantly in its importance. Inflation estimates released this morning would seem to increase the chances of a 25 bps rate rise early next month. Range: .9172/.9226.
Markets: Nikkei -1.6%, Hang Seng -0.9%, Kospi +0.2%. Gold flat at $1131/oz, oil -0.9% at $77.30/bbl.