Market Rumours

The disappointment of UK 3Q GDP coming in at -0.3% should lead to the pound underperforming and lend a bid tone to EUR/GBP says a trader. He looks for it to hold above the day's low of 0.8980 and advance toward Tuesday's one week high of 0.9056.

Ahead of a U.S. holiday the market normally takes it easy. However, Barclays Capital says USD/JPY below 88.00, the USD index below 74.75 and EUR/USD above 1.5040 would confirm that the U.S. holiday is having less of an impact than normal. EUR/USD trades at 1.5042, the USD index at 74.673 and USD/JPY at 87.70

EUR/USD back above 1.50 turns the focus to resistance at 1.5040 and the 2009 high of 1.5065 says Barclays Capital. While in a holiday-thinned markets a higher may be difficult, the bank remains bullish for the rest of 2009 and looks for the break above 1.5065 to open the topside toward 1.5245-1.53. The rate now trades at 1.5027. BarCap says intraday consolidation above 1.4980 is another positive.

Sterling may dip ahead of the release of the UK 3Q GDP revision numbers due 0930 GMT says a trader. The pound has enjoyed a strong run up Wednesday amid market chatter that October's shock -0.4% print may be revised to -0.1% or even flat. However, with such a reading now already built into sterling's value the lure of taking some profit ahead of the release may prove too tempting to ignore. He looks for GBP/USD to head back toward 1.6650, EUR/GBP back to 0.90.

U.S. bond yields continue to fall and a side effect of this will be a lower USD/JPY with a break below 88.00 seen imminent says BNP Paribas. Japan's better than expected trade surplus announced Wednesday will just add to projected JPY strength says the bank. USD/JPY now at 88.24.

GBP/USD prints a near one week high of 1.6722 but should run into resistance at 1.6745 with any further gains capped near the recent high of 1.6878 says Commerzbank analyst Karen Jones. On the downside, support comes in at 1.6478 ahead of 1.6460 and Jones says the latter is a breakdown point toward the 1.6294-1.6250 area. GBP/USD now at 1.6727.

Wobbly European banks could hold the key to short-term euro direction. Many may have to dump foreign assets and bring euros home in the coming weeks, pushing the currency higher, according to Forex Focus by Katie Martin.

USD/JPY may fall to 82.00 by mid-next year, also there's "further risk of the dollar/yen testing the record low at 79.75," says JP Morgan FX strategist Tohru Sasaki. Says pair to weaken due to possible rise in Japan's long-term interest rates, overseas players' buying of Japanese stocks, other central banks' buying of JPY to increase JPY-holdings in their reserves, also Japanese exporters' repatriation. Fed likely keeping rates low for months would also push pair down. Sasaki says intervention risk low; "We believe that yen-selling intervention by Japanese MOF would still be highly unlikely even if the dollar/yen breaks the historical low." Pair last 88.36.

One-month ATM USD/JPY implied volatilities rise tad to 10.40%/11.10% from 10.30%/11.00% in New York as some players buy options as they see risk of USD/JPY falling below 88.00 in very near term, says options dealer at major bank in Tokyo; yet vols won't likely rise much as players unwilling to take positions ahead of U.S. Thanksgiving Day holiday season, when trading often quiet. Some players buy USD/JPY ATM straddles with 88 strike with $300 million face vale, expiring on Dec. 15. USD/JPY falling, now at 88.36, initial support at 88.00 with good chance of breaking below the mark and opens new way to 87.50 in global day, says senior dealer at major bank in Tokyo. Says Japan exporters selling for their regular month-end settlement; expects such selling flow to continue this week. Adds speculators also selling due to narrower gap between U.S. and Japan long-term interest rates, a sign market sees Fed won't take any exit strategies anytime soon. EUR/USD last 132.27, dealers tip support at 131.50.