GBP remained under pressure amid a broad pick up in risk reduction following further equity market losses. Cable extended Tuesday’s losses and hit 1.6045 lows early on in the European session. An Asian account was a good buyer around 1.6050 and forced a move up to 1.6139 highs, but sellers were persistent on strength and the pair languishes at 1.6075. Halifax house prices fell 0.5% in June after a 2.6% m/m rise in May, which was not as bad as feared. The market reaction was muted, with risk skewed to the downside and an eventual push on 1.6000, which is being supported by option bids, reserve managers and corporate accounts. We expect sizeable stops below and through 1.5970-80. Elsewhere, EUR-GBP made an early test of Tuesday’s 0.8655 highs before moving modestly lower amid euro supply. Risk remains on the topside though, which encourages good demand on dips. Meanwhile, GBP-JPY price action has been choppy since the European open; trading down to 150.94 lows before rebounding to 152.34, where good selling leverage funds forced a move back in to 151.60.
AUD-USD carved out a modest recovery after recording early European lows of 0.7828. The source of the upturn has been good demand from an Asian reserve manager that is reportedly protecting mooted option barriers at 0.7800 and 0.7780. AUD-USD traded as high as 0.7890 before succumbing to more dollar demand amid a broad rise in risk appetite and may drift back towards the early lows. AUD-JPY also saw good two ways flows. The pullback, which started on Tuesday, extended to 73.60 in Asia, but bargain hunting lifted it to 74.50 before speculative repositioning forced a move back in to 74.00. Concerns of overstretched positioning in the cross has left a cautious tone here, while AUD-USD downside strike interest picked up, with three week 0.7550 dealing and a two month 0.7300 strike changed hands.