USD

While the USD remains under general pressure helped both by expectations of more QE and the threat of a downgrade from Moody’s, we would not jump on the USD negative bandwagon here. There is still technical support in the USD index in the 79.50 area, as well as various big levels for the USD against the other majors. QE is not yet a done deal. Even though we expect it, it is a much closer call than the market is pricing in, and we are in any case not convinced that more US QE will prove USD negative against the EUR given the lack of yield advantage available in the EUR (and many of the other majors). Negative USD momentum is hard to oppose, but we expect at least a pause around here.

GBP

UK trade numbers were better yesterday, but were probably mostly a correction to holiday related distortions. Today’s labour market data may be of more significance, as the employment data remains puzzlingly better than it should be given the flat performance of underlying GDP growth. More strong employment data would support the strong sterling performance we have seen against the USD. However, there are major resistances above 1.61 in GBP/USD and we would not expect much advance from here ahead of the Fed decision tomorrow.

NOK

That both the CHF and JPY gained strongly against the USD yesterday underlines that this was a USD move rather than one based on better risk appetite. In part that may have been because of the talk of a downgrade form Moody’s as well as the expectation of QE, but it is hard to see the US suffering against the JPY because of a Moody’s downgrade, given the dire situation of the Japanese public finances. While the JPY TWI has not risen much due to general USD weakness, and there is consequently little obvious threat of intervention, we would still see this as a JPY selling opportunity.