Technical positioning remained important on Wednesday as the Euro remained vulnerable to a correction
following the second failure to break resistance in the 1.36 region and a drop below 1.3550 triggered
fresh selling with the pair moving to the 1.3500 area. There were longer-term expectations that the ECB
would provide additional liquidity through another LTRO.
There were some hopes that the US would be able to move very tentatively towards a deal over the
government shutdown and debt ceiling even if it is a stop-gap measure. Underlying uncertainty remained
high with the volatility seen the short end of the US bond market leading to some speculation over a
developing dollar shortage and defensive demand for the US currency.
Fundamental trading opportunity/event risk over the next 24 hours
There looks to be very little chance of a change in
rates or quantitative easing at this month’s meeting.
There is a small chance that there could be a
statement to reinforce forward guidance.
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