The GBP/USD opened in Asia around 1.9740/45 after falling sharply from 1.9820 during the Lon/NY session on the back of profit taking and a broadly higher USD led by USD/JPY. There was talk in early Asia of a few stops below 1.9725 and they were triggered when high-yielding currencies fell across the board led by a steep pullback in the AUD/USD in the wake of the RBA decision to keep rates on hold.
The RBA decision spooked a few GBP longs anticipating a BOE hike on Thursday and the GBP/USD eased to 1.9717. The GBP/USD quickly recovered and settled between 1.9730/45 when Japanese investors bought AUD/JPY and GBP/JPY. The EUR/GBP edged higher today after key support around 0.6740/45 held yesterday's move lower. The cross opened at 0.6751 traded up to 0.6759 before settling around 0.6755.
There was no reaction from the KPMG report showing strong wage growth, which bolsters the case for a rate rise. The GBP remains underpinned by carry trade demand, but the 1.98-plus level should prove difficult resistance ahead of the BOE decision. Traders look for the GBP/USD to trade between 1.9650/1.9850 ahead of Thursday's decision.
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