FX Rangebound by Korman Tam

At 4:30 AM UK August Retail Sales m/m (exp 0.1%, prev 0.7%)
UK August Retail Sales y/y (exp 4.0%, prev 4.4%)
At 8:30 AM US Weekly Jobless Claims (exp 321k, prev 319k)j
At 10:00 AM US August Leading Indicators (exp -0.2%, prev 0.4%)
At 12:00 PMUS September Philadelphia Fed Survey (exp 2.3, prev 0.0)

The greenback holds steady against the majors heading into the Thursday session, continuing to recover following the post-FOMC selloff. The dollar is trading just beneath the 1.40-barrier against the euro and near 2.0020 versus the sterling. We expect the 50-basis point Fed rate cut to weigh on the greenback over the coming weeks and foresee the currency to tumble to fresh lows against the euro and fall closer toward parity versus the Canadian dollar.

Economic data from the US in the coming session will include weekly jobless claims, August leading indicators and the September Philadelphia Fed survey. Weekly jobless claims are estimated to edge up slightly to 321k, from 319k from the previous week. August leading indicators are seen falling by 0.2%, compared with a 0.4% increase from July. Meanwhile, the Philadelphia Fed survey is forecasted to improve to 2.3 for September, up from a flat reading in August.

Currency traders will focus closely on global equity bourses amid the increase in risk taking following the Fed rate cut. Any fresh revelations of deteriorating banks’ balance sheets or tightening credit conditions would likely prompt a renewed sell-off in equities, and subsequently a sharp pull back in the yen carry trades. Despite the Fed’s aggressive policy easing, the US economy remains in a precarious state – amid heightened fears of a recession due to the slumping housing market.
Sterling Hovers Above 2

Cable holds steady near 2.0020 ahead of UK retail sales later in the session. The retail sales report is seen falling to 0.1%, from 0.7% in the previous month, while the annualized figure is forecasted to fall to 4.0%, versus 4.7% a year earlier.

GBPUSD encounters interim resistance at 2.0030, backed by 2.0070 and 2.01. Subsequent ceilings will emerge at 2.0140, followed by 2.0170 and 2.02. On the downside, support begins at 2, followed by 1.9980 and 1.9950. Additional floors are eyed at 1.9930, backed by 1.99 and 1.9870.