Sterlings Stunning Descent

It’s been one bad day after the other for the Sterling, which has dropped nearly 6 per cent against the greenback and over 10 per cent against the Yen since the start of December. While much of the Sterling’s route is as much about overall risk trends as domestic drivers, its clear the United Kingdom and its economic fortunes have been and remain less than inspiring. Further evidence of its dour outlook were seen overnight with Bank of England Governor, Mark Carney expressing his view that slower global and domestic growth is not an environment to suggest an interest rate hike is needed.

So for a Sterling punter it’s a clear case of value vs momentum and the technical picture continues to suggest little in the way of relief is on the horizon. GO Markets’ analyst Adam Taylor has noted that Cable has been respecting resistance levels indicated by the 11 and 22 day EMA’s (on a four hourly chart). Add to the equation that key support around the 1.44 has been breached, technicals’ indicate that 1.38 may be a reasonable view in terms of longer term support. This evening will see the release of UK jobs data provide some direction. The official jobless rate is expected to remain at 5.2 percent.

Meanwhile, the Australian dollar has failed to maintain its short-term rally with price action slipping over the course of the day. The correlative value between the Aussie and Chinese markets has remained strong, and losses across Chinese/HK equities in today’s session would suggest yesterday’s short term boost to sentiment has all but faded. The promise of stimulus in China may very well be a catalyst for a quick sentiment booster, but it would appear that its being looked at as all taste and no nourishment. The Aussie’s now convincingly below the 69 figure and may run into some buying activity just above 68.5 which may serve as a bit of support. (Currently 68.6)

Today AFR (Tip: Copy and paste the headline into Google News and click the link that appears first) is reporting the co-head of economics at ANZ, Cherelle Murphy, is saying the Aussie’s fortunes are indeed lower but are likely to bottom out around 64 US cents before recovering.

Coming up we’ve got UK jobs data, US CPI and the Canadian interest rate decision. While the Bank of Canada is expected to hold at rates at 50bps, there’s much conjecture around the likelihood that they will slash rates to zero in 2016. Here’s a preview courtesy of the Global and Mail which quotes Barclays as saying the BoC are likely to cut rates today.