With the GBP shrouded by a veil of uncertainty, Volumes have been very light in Asia Maybe a case of selling the facts after the latest achievements; snap election uncertainty in the mix; the good news is in the price, hence profit-taking amid the very slim possibility that a rogue EU politician vetoes an extension. Look for 1.2870 as the critical upward pivot while traders continue eyeing 1.2800 support.
The USD/JPY is falling as risk sentiment sours but adding to the downside momentum dovish BoJ bets are likely falling by the wayside as the Japans central bank might be more reluctant to cut rates at months end as the drop in global risk has possibly reduced the need for a near-term rate cut.
The EUR/USD And AUD/USD
The EUR/USD finds itself precariously perched near the top of the recent ahead of the Thursday EU PMI data while the Aussie remains prone to any further economic weakness from China.
Speaking of which investors who were expecting a Pboc policy deluge from water cannon may now have to settle for a water pistol approach Its interesting scenario for currency markets as US dollar bearishness has been building momentum and the lead up to the FOMC could be the first real test for the dollar bears to navigate. However, with so much of the dollar direction getting attached to Fed forward guidance, it’s unlikely any big currency moves will happen until we clear the next FOMC meeting. So, over the short term, I would expect G-10 pros to be as equally comfortable trading the dollar from either side of the risk on risk-off coin ahead of Fed’s rate decision.