Market Rumours

Sterling is looking vulnerable, says Commerzbank analyst Karen Jones. Says GBP/USD's initial upside thrust is looking tired, and while another move towards 1.6675-1.6745 cannot be ruled out, such previous attempts have ended in failure and the risk is that the same happens again. Says key support comes in at 1.62, and failure here will open risk towards 1.5708. In EUR/GBP, Jones says the cross appears to be basing ahead of the 0.8853-20 key support area, and while this may be retested the favored route is for a recovery towards 0.9080-0.9125. EUR/GBP now at 0.9046, GBP/USD at 1.6310.

The Bank of England decision due Thursday could offer all the ammunition that sterling bears need to jump back into the market after the recent pause. A chunky extension to the BOE's asset purchase scheme looks increasingly likely after last month's poor output data. But the big question is whether that's already priced into the pound, according to Forex Focus by Katie Martin.

Global factors to continue to drive USD/INR this week with move toward 47.25 likely (currently 47.03), says Barclays Capital. Expects options implied volatility to stay firm in short tenors as moves in NDFs continue to offer value to long gamma players. "While we are constructive of the INR in the medium term, we would like to wait for a turn in market sentiment to position ourselves for INR strength," says house. Expects moves in long end MIFOR curve to track OIS curve hereon, expects curve to flatten as front end FX NDF forwards continue to be volatile and move higher.

EUR/USD rebounding strongly after falling to 1.4772 low (from 1.4793) immediately after RBA announces 25bp rate hike to 3.50% as widely anticipated. Knee-jerk sell-off in tandem with AUD/USD moves, from players who had bet the RBA would surprise with a 50bp hike but EUR/USD expected to trade sideways in 1.4725-1.4850 range in lead up to FOMC rate announcement tomorrow, says Singapore-based dealer. EUR/USD last 1.4794.

Strong USD/JPY offers stand at 90.70, protecting stops above that level; while customer buy orders clustered near 90.20, stronger buy orders at 89.80-89.85, says Singapore-based dealer. USD/JPY last 90.38.

EUR/USD climbs through 1.4800 as Asian markets react to news IMF has sold 200 metric tonnes of gold to the Reserve Bank of India. Pair has climbed from around 1.4770. Sue Trinh, FX strategist at RBC Capital says the announcement supports the view that central banks are actively looking for ways to diversify their reserves away from USD. In India's case, they are seeking greater exposure to gold. Says first serious resistance likely to be at 1.4850. Now 1.4800. Earlier high was 1.4806.