Cable taking a Sterling Pounding
02/09/08 21:41
Cable taking a Sterling Pounding on slow growth and
call for substantial cuts
At the peril of many day traders, thin liquidity over the holiday weekend has further compounded the extensive August moves. Unless your method of trading is suitable to current conditions, take caution until efficiency and price stability take effect.
At the peril of many day traders, thin liquidity over the holiday weekend has further compounded the extensive August moves. Unless your method of trading is suitable to current conditions, take caution until efficiency and price stability take effect.
- Sterling gapped lower earlier today following comments from UK Chancellor of the Exchequer Alistair Darling over the weekend. Darling said that UK is facing "arguably the worse" economic crisis for 60 years and such downturn could be "profound and long-lasting". David Blanchflower, the known dove in BoE, forecasted UK unemployment could reach 2 millions by the end of the year and called for a substantial rate cut quickly. While Sterling remains generally weak, some support is seen after UK PMI manufacturing unexpectedly improved mildly from 44.3 to 45.9 in Aug.
- RBA cut rates for the first time in seven years as widely expected. The overnight cash rate is lowered by 25bps to 7.00%. The statement is somewhat less dovish than expected and suggests that the next policy move will be data dependent. The statement said that the Board will continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2-3 per cent target over time." Today's GDP will offer more information on anticipation of rate adjustments in October.
- While the Americans are on Labor Day Holiday today, a couple of developments rock a relatively thin forex markets. Hurricane Gustav is downgraded to a Category storm, the second weakest level, by the National Hurricane Center in Miami. This eases concern of widespread damage to oil facilities. Crude oil dives to as low as 112.45 following the news. In turn, dollar is boosted across the board.
- The Japanese yen enjoyed some rally in the European session earlier today following weakness in the equity markets. However, the yen gives up some gains after Yasuo Fukuda resigned as Japan's prime minister after less than a year in office. Shinzo Abe resigned last year in July. Though, note that the break of 108.13 support in USD/JPY still suggests that a short term head and shoulder reversal pattern is completed and 110.66 could mark the top of whole medium term rebound from 95.77. More upside is still in favor for the Japanese yen in general.