Overnight movement with Sterling following the weakest RICS Housing data release in a year added to the downward GBP momentum built yesterday as expectations of a dovish BOE coupled with the risk that too much QE is priced for the FED saw cable break 1.5840 support to touch 1.5773

Yesterday was a quiet session for US markets, showing how significant tonight’s FED decision will be. While no change to official US interest rates is anticipated this evening, there is much speculation as to whether the Fed will announce fresh quantitative easing measures to help ease a slowdown in the rate of recovery in the US economy. We suspect that there will be no changes, with the central bank instead presenting a more cautious outlook in terms of the tone of its policy statement. However, if the Fed does take action this is likely to lead to further dollar selling.

If we look at Euro price movement over the last 24 hours it is surprising what a difference a day makes in the financial markets. Virtually all of the NFP euro gains have been unwound over the last 24 hours and now the EUR/USDis steadily hovering above its month long trend line support at 1.3120 ish .EURUSD traded to an overnight low of 1.3136 vs. NY close 1.3225 while GBP is the G10 underperformer on the day which has opened up down against all 16 of the most actively traded currencies, with GBPUSD trading almost 200 pips from its NY close – now at 1.5755 and 1.1964 against the Euro. The FOMC tonight may well alter the picture of course. What would really assist GBP’s move lower is EUR/GBP moving out of its recent range. A sustained move above 0.8340 would encourage a move to the upside but overall a lot will depend on tomorrows release of the Quarterly Inflation report.

The biggest loser on the day is without a doubt the GBP – momentum in the market selling against the Pound has increased quite considerably with a clear sign we are seeing profit taking towards the lows on the back of weak fudamental data out this morning. Looking ahead at the US market opening it is likely US market participants will be “Shorting” Sterling on the back of the release and more importanly ahead of the highly anticipated Quarterly Inflation report due tomorrow so buyers should consider protective STOP orders or consider covering any short/medium term requirement.

If you would like to discuss your requirement with me further do not hesitate to give me a call on my direct line +0044 1736 335264 or email me direct at tom.trevorrow@torfx.com

Tom Trevorrow

Currency Analyst

+0044 1736 335264

tom.trevorrow@torfx.com