FX Market Summary 09-24-2013: GBP/USD breaks 1.60 support

The UK BBA lending data was slightly weaker than expected, although mortgage approvals were still at a five-year high. The data tone maintained some speculation that the rate of UK growth could start to fade over the next few months. Bank of England MPC member Miles restated his opposition to tighter monetary conditions given the need to propel the economy to self-sustaining growth.

After failing to make a fresh attack on resistance towards 1.6050, GBP/USD was subjected to renewed selling pressure and a break of 1.6000 support helped trigger further losses on stop-loss selling with a low below 1.5960.

The dollar made some initial headway on Tuesday as markets struggled to justify additional buying for the European majors. The yen, however, was the strongest performer overall as USD/JPY dipped to lows around 98.50 at the US open while EUR/JPY dipped to below 133.0.

The German IFO index recorded its fifth successive monthly improvement as it edged higher to 107.7 for September from a revised 107.6 the previous month. The improvement fell short of market expectations and EUR/USD retreated back below the 1.35 level following the data release.

The Euro was also unsettled by continued reflection over ECB Draghi’s testimony on Monday with a particular focus on the LTRO comments. There were similar comments from ECB Council member Nowotny on Tuesday as he stated a further liquidity option was possible in the future, although not needed at present.

New York Federal Reserve Governor Dudley continued his run of media briefings seen since the Federal Reserve meeting last week. He again expressed concerns that the economy had been weaker than expected and that, in this context, the decision not to taper bond purchases should not be seen as a surprise. He also commented that a tapering was still possible later this year. Given mixed messages, markets tended to suspend belief surrounding Fed policies as they looked to focus more on the threat of a US government shutdown within the next week if no political deal can be reached.

The Euro was still generally on the defensive in subdued trading conditions as EUR/USD tested the support zone below 1.3480 into the US open with on-going pressure for a correction of last week’s gains.

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