Daily Forex Overview

Previous session overview

On Monday, the British pound slumped to its lowest level since late January as traders anticipated another interest-rate cut and a shift to quantitative easing from the Bank of England at its policy meeting Thursday.

The euro rose against the dollar and the yen in Asia Tuesday as the Australian central bank's unexpected decision in balking at further monetary easing raised market appetite for riskier currencies such as the euro and the Australian dollar.

The British pound took a beating on Sunday and Monday as investor confidence remains low and as UK data remained broadly disappointing. First, the Purchasing Managers' Index (PMI) for the UK's manufacturing sector slipped down to 34.7 from 35.8, putting it just above the record low of 34.5 reached in November.

The Japanese Yen held the 97-98 range but strengthened against most currencies as the overwhelming stock market losses brought the old correlations back into play. GBPJPY was the worst performer as investors bailed out of the pound.

The Reserve Bank of Australia's decision Tuesday to leave its official cash rate target unchanged boosted the Australian dollar in the face of ever worsening turmoil on global equity markets, and fears of worse to come.

Market expectation

Risk aversion Tuesday is receding as the euro starts to creep higher against the dollar and yen as global stocks markets show early signs of recovery.

But dealers said these one-off events were unlikely to sustain the ailing common currency for long, as attention returned to financial woes in the Euro zone and global economy.

EURUSD corrective pullback off late Asian highs of USD1.2676 extends to challenge reported demand in the area between USD1.2635/25 (USD1.2623 38.2% USD1.2537/1.2676). Stops noted on a break of USD1.2620, which if triggered seen opening a deeper move toward USD1.2600/1.2590. More stops noted below. Resistance remains at the overnight highs at USD1.2676, with offers said to extend to USD1.2680. Above here and USD1.2700 moves into view more offers here with reports now of stops above.

GBPUSD holds off highs in early European dealing but remains buoyed above USD1.4100. Offers seen placed between USD1.4140/50, a break to open a move on toward USD1.4175/80 ahead of USD1.4200/10. Support seen placed at USD1.4100, more between USD1.4085/80 ahead of USD1.4065/50.

Short-term players bought back dollars to cover bets that any further tumbles in share prices would drag down dollar-yen.

But dealers said any further dollar gains against the yen would likely top out below JPY98.00 as players remain hesitant to buy dollars aggressively ahead of the closely watched non-farm payrolls report, for February, due Friday. As traders struggled to discern direction in the currency markets, the U.S. unit would likely stick to a JPY96.80-JPY97.80 band during Tokyo hours.

Most important events of the day