So much for sterling resiliency.   Cable stops have been tripped through 1.5150 and we’ve quickly fallen to 1.5100, while EUR/GBP has rallied to .9090 having earlier fallen as low as .9047. 

 The early sterling strength was a little baffling given the raft of bad news/articles.  The improvement seems to have been down  to cable buying out of Eastern Europe and some traders finding solace in Moody’s take on the UK budget deficit.  The second part is lost on me. The only Moody comments I saw were rather unsettling.  I possibly missed something, wouldn’t be first time.

Cable lost a little ground during Asian trade, presently down at 1.5165 from a North American close Friday up around 1.5195.  EUR/GBP is steady around .9060.

Given latest developments sterling is showing some resilience.  Latest weekend opinion polls continue to suggest at hung parliament being the most likely outcome of the general election, while UK rightmove house price data for March didn’t make very palatable reading.  The 0.1% m/m rise was the lowest ever recorded in March and backs up recent data suggesting the UK housing market could be in for a tough time as the year progresses.

Elsewhere Moodys rating agency has come out warning on Uk’s AAA rating.

Will be interesting to see whether this resilience lasts as European trading gets underway.

Cable sits at 1.5065, effectively unchanged from where North America closed out Thursday, while EUR/GBP is marginally firmer at .9093 from around .9078.

Article by AEP in The Telegraph entitled “Europe’s banks brace for UK debt crisis” will have been duly noted, but to be honest it offers nothing new at all.

No major data releases today.

Sell orders tipped at 1.5090/00, stops through 1.5105.

Interesting to note a couple of UK clearers have been sellers of the EUR/GBP cross up around .9110/20 in past two sessions. Guess not everyone is so down on poor old sterling.

Well that’s the aforemntioned stops through 1.5030 and 1.5040 out of the way and we’ve been as high as 1.5062 so far, presently at 1.5053. 

Stops were also tripped through .9090 in EUR/GBP and we’ve been down to .9062 so far, presently at .9068.

Guess there were some early clues to this sterling strength.  Firstly the US custodial buying cable. As I said when they turn up they can have substantial interest. In a currency pairing as illiquid as cable they can have big impact.  Secondly reports of two UK clearers selling EUR/GBP on consecutive days around same level should have been noted. I certainly noted it all  Oh well, nearly home time.

To 2.5% in February from 2.4% in November 2009, according to Bank of England survey.

Cable extending rally to 1.5000 at writing. As mentioned earlier those US custodials can be lumpy.

Meanwhile UK clearer reportedly selling the EUR/GBP cross, which is down slightly at .9100. Funnily enough there were reports yesterday of a different clearer selling the cross around same levels (ie .9110/20). Both these clearers are different from the UK clearer said to have been recently buying 6month 1.4400 cable puts. Which would kinda make sense I guess.

Sterling has weakened across the board during the Asian session, cable presently down at 1.5015 from a North American close Monday up around 1.5065 while EUR/GBP is up at .9068 from around .9045.

A special poll carried out for The Times newspaper shows Labour and the Conservatives running neck and neck in key marginal seats which will determine the general election, raising further the spectre of a hung parliament.

UK RICS house price balance for February came in at 17, demonstrably lower than the median forecast of 30 and the lowest reading since August 2009.  Looks like the strong house price rally seen in 2009 has hit the buffers.

Finally Moody’s has warned that wind down of UK banking bailout programmes could result in rating downgrades for some UK banks.

Not much of UK economic data front today:

09:30 GMT:  UK trade for January.  Visible -7000; Non EU -3350;  total -3000

Sovereign buy interest tipped down at 1.4950.

The longer this session goes on the more likely we are to see a prolonged squeeze of EUR shorts. The measures we spoke of earlier this morning will be getting EUR shorts even more nervous. EUR/USD, EUR/JPY and EUR/GBP are all higher on the session but it’s the first two which are most in danger as that’s where the short positions are. Not hearing of many sell orders until 1.3750/1.3800 in the EUR/USD so this squeeze might go on for another while yet.

Not much movement so far this morning although the EUR crosses are mildly higher after the ‘gas-bagging’ from various EU leaders. EUR/JPY is at 123.20 and EUR/GBP is at .9010. This whole Greece situation has developed into a stand-off between hedge funds and Sovereign players and it remains to be seen who blinks first.

The Icelandic people are obviously all FX traders as they have taken a punt on the EUR and GBP continuing to fall, thereby reducing any future payments. Or?

Good luck today.

The sharp rally off .8660 looks to have found an interim top at .9150 and the market is currently in retracement mode. The 38.2% retracement is at .8960 and the 61.8% is at .8845. Based on the ferocity of the initial up-move, I remain a buyer on dips although the fact that the market stalled at a previous major high from last December is certainly interesting. Play the edges is once again the best advice I can give. Short term support/resistance parameters are at .9010/.9100.

Swiss names are continuing to sell the EUR/GBP cross, which is presently down at .9050.  This has helped lift cable back over 1.5100 again, presently at 1.5110.

 We’ve been as high as 1.5118 so far, just shy of aforementioned sell orders at 1.5120/30.  No confirmation of where stops are, but probably not far north of the 31 level, yesterdays North American high.

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