Sterling Falls on Downgrade Rumour

The pound hit a fresh seven-month low on worries about the BOE minutes and a downgrade rumor. The Australian dollar was the best performer on the day. Upcoming events include the Japanese trade balance and comments from the RNBZ leader. A rumour circulated in early US trading that S&P was prepared to downgrade the UK's sovereign rating. Cable slipped 30 pips to 1.5460 and eventually to a 7-month low of 1.5416. Both GBPUSD Premium shorts remain in progress as do USDCAD longs. EURJPY, USDJPY, AUDJPY and EURJPY hit their targets. See more on the trades in progress in the latest Premium Insights.

The rumour appears to be false but the price action shows the unwillingness to buy the pound, especially ahead of the BOE minutes on Wednesday. The minutes could show a lively debate about further easing as the economy struggles.

The Canadian dollar continued to weaken after a disappointing wholesale sales number and indications of weakness in the Toronto housing market. USD/CAD broke above 1.01 on Monday in low liquidity but held above that key technical level today, indicating more weakness is likely on the way.

Highlights on the calendar in Asia trading include January Japan trade balance at 2350 GMT. BOJ member Morimoto also delivers a speech at 0030 GMT. There is also the all industry activity index at 0430 GMT; it is expected to rise 1.7%.

At 0230 GMT, the focus shifts to a speech from RBNZ governor Wheeler. With the kiwi dollar just 3 cents from a record high, he may attempt to talk down the currency.