Risk appetite was put on the backburner yesterday and has stayed there overnight, with the dollar firmer where there has been any notable change. Asian stocks got hit pretty hard. Sterling has seen some further across the board weakness.
Cable is down at 1.6225 having closed out Wednesday around 1.6310, while EUR/GBP is up at .8730 from around .8675, buy stops having been triggered when the 200 dma at .8695 gave out. Sterling having been a major beneficiary of the recent dollar weakness is now a major loser in the greenback’s rebound.
The political uncertainty in the UK, with PM Gordon Brown fighting for his political life, isn’t helping sterling’s cause. Personally I think he’ll just about manage to hold onto his grip on power.
For today some event risk, but not too much, in the form of the latest Bank of England meet. There’s a strong feeling rates and quantitative ease will be held steady at 0.5% and £125 bln respectively.
EUR/USD is steady at 1.4170. There have been ongoing reports of sovereign buy interest in the low 1.41’s and this has lent the pairing some much-needed support.
Event risk for the euro looms large in the form of todays ECB meet. There is a general expectation the bank will keep rates steady at 1%, but more uncertainty surrounds the quantitative ease programme, and whether the European central bank will add something additional to their 60 bln euros covered bond purchasing programme. This uncertainty should help limit euro gains this morning.