Dukascopy Afternoon Forex Overview – Sept 24 09

Previous session overview

The U.K. pound is down sharply Thursday morning after remarks from Bank of England Governor Mervyn King suggested the U.K. central bank is comfortable with weakness in the currency.

The dollar in general is lower, although losses against the euro and other major currencies are muted and trading is somewhat cautious ahead of the G-20 meeting of major advanced and emerging economies later in the session.

News that initial claims for jobless benefits in the U.S. fell 21,000 to 530,000 in the week ended Sept. 19, compared to the expected increase to 550,000, added to the pressure on the dollar and sent the euro to session high at USD1.4803.

The sharp losses in the pound were a key focus in currency markets Thursday morning, with the currency dropping to a low of USD1.6170, its lowest level Monday, after King said the sterling’s weakness was “helpful” to the process of rebalancing the U.K. economy in an interview with a regional U.K. newspaper.

The clear signal that the U.K. central bank is happy to tolerate currency weakness quickly pushed the euro up to a fresh five-month high against sterling and shoved the pound lower against the dollar.

Market expectation

Pound probes under USD1.6150 to USD1.6144 with traders suggesting that if any stops triggered the initial selling seen soaked up by profit take demand following the pressured move. A clear below area between USD1.6115/10 move into view.

EURUSD has eased back slightly for trade around USD1.4780 after seeing high print at USD1.4803 on the earlier push higher, traders noting the various directional conflicts in the pair provided by a very bid euro-sterling, a heavy euro-Swiss as well as dollar and cable weakness. Pair remains a buy on dips, several traders argue, even as an overnight slide took the pair below USD1.4700 area for overnight lows at USD1.4688. Intra-day stops now mentioned below USD1.4760 area of early US levels, with bids placed back at USD1.4735.

EURGBP getting reports those UK clearer and major Swiss names cited for providing the pressure that took rate above stg0.9140. Rate touched stg0.9142 but said to have met decent headwind sales, traders adding that area above stg0.9140 looks heavy. Rate currently trades around stg0.9137.

Foreign exchange market focus will now turn to the G-20 meeting that starts in Pittsburgh on Thursday.

Analysts said the risks to the U.S. dollar stemming from the meeting look balanced.

Markets will also be keeping an eye on the euro/Swiss franc exchange rate, which has fallen to its lowest levels since the Swiss National Bank last intervened in June.

Movers & Shakers:

Important levels:

Source: Dukascopy