The return in risk aversion overnight continued into the London session as Moody's cut the credit rating of one of the UK's largest banks on the likelihood of more credit writedowns to come. European bourses were about -2% lower while risk trades in FX remained heavy. GBP/USD was punished more than -220 pips towards 1.4050/60 area as leveraged names ostensibly sold GBP/JPY in size. The 1.40 level is now critical support here and we would expect a new and sharp round of weakness if below there.

EUR/USD was about 40 pips higher towards 1.2750/60 despite the weak tone to eurozone data. PMI manufacturing in the region came in at a worse than expected 34.4 in the final January read after a preliminary 34.5 print. The pair saw some buying on an approach of the 1.27 support zone. We would need to see above 1.28 short-term to shift the focus higher. The price action in the yen crosses was modest with USD/JPY near 89.15/20 and EUR/JPY by the 113.70/80 area. We expect more volatility here in the NY session as top tier US economic data look poised to take risk trades for a ride.

Upcoming Economic Data Releases (NY Session) prev est

  • 2/2 13:30 GMT US Personal Income DEC -0.20% -0.30%

  • 2/2 13:30 GMT US Personal Spending DEC -0.60% -0.90%

  • 2/2 13:30 GMT US PCE Deflator (YoY) DEC 1.40% 1.10%

  • 2/2 13:30 GMT US PCE Core (MoM) DEC 0.00% 0.00%

  • 2/2 13:30 GMT US PCE Core (YoY) DEC 1.90% 1.70%

  • 2/2 15:00 GMT US ISM Manufacturing JAN 32.4 33

  • 2/2 15:00 GMT US ISM Prices Paid JAN 18 19

  • 2/2 15:00 GMT US Construction Spending MoM DEC -0.60% -1.20%