European Morning Forex Wrap Up; sterling weak across the board

Mon, Nov 2 2009, 11:53 GMT
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S.Korea fx authorities spotted buying dlrs to curb won's strength -Traders Shanghai share index ends up 2.7%, biggest one day gain in 3 weeks Royal Bank of Scotland believes close to agreement with Treasury with respect to it's proposed participation in the APS. Negotiations between Treasury and EC in final stages, will include divestments which do not threaten it's recovery plan Swiss October PMI 54.0 compared to median forecast of 55.0 Italy October manufacturing PMI 49.2, up from 47.6 in September, and better than median forecast of 48.6 Euro zone October (final) manufacturing PMI 50.7, unchanged from flash estimate, in line with median forecast, 18-month high UK October manufacturing PMI 53.7 vs revised 49.9 in September. Appreciablybetter than median forecast of 50.0 Forex rates not expected to be major topic at this weekend's G20 meeting. May be discussed in context of rebalancing global economy - G20 sources French new car sales up 4.2% in first 10 months of year. Up 20.1% y/y - CCFA Main feature of this morning's session has been across the board weakness in sterling, cable down at 1.6375 from an early 1.6455, while EUR/GBP is up at .9025 from around .8970. The upheaval in the UK banking sector; speculation the BOE will add to QE later this week, maybe as much as £50 bln and ongonig worries surrounding the horrendous public finances with Labour planning more spending, are among factors weighing. So far buy orders down at 1.6340/50 have provided tenuous support. Appreciably better than expected UK manufacturing PMI data (see above) lend sterling some fleeting support, but it didn't take long for the data's afterglow to dim. Sell orders seen at 1.6410 up through 1.6430. Sell stops seen on move through 1.6340. EUR/USD marginally firmer, presently at 1.4785 from an early 1.4760. Sovereign buying below 1.4700 in Asia overnight has provided a good base. Last week's risk aversion has dissapated somewhat (European stocks up marginally, oil up over a buck) and this is lending support. USD/JPY at 90.00 effectively unchanged on the day. An early rally floundered quickly, decent selling of GBP/JPY by a UK model fund not helping matters. Sell orders seen at 90.30 up through 90.60. Stops said to be gathering around 90.70. Option expiries at 90.00 and 91.00 today.

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