--Sterling seen falling after the UK budget statement at 1230
GMT
--Dollar firm against major peers
--Polish rate decision ahead, zloty softer
By Eva Szalay
The pound was steady in European trading hours Wednesday ahead
of the U.K. Chancellor's Autumn Statement, while the dollar was
mostly firmer as disappointing economic data from the euro-zone
capped gains in the euro.
After slipping to its weakest level against the euro in six
weeks in late Asian trade, the pound firmed slightly against both
the single currency and dollar as market participants awaited
George Osborne's speech at 1230 GMT, where he is expected to
confirm that the U.K. economy is faring less-well than previously
anticipated.
Traders expect official economic growth forecasts to be lowered
and for Mr. Osborne to indicate that government borrowing targets
are likely to be missed, prompting many to justify a negative--or
short--bias against the currency.
"I'm happy to be short sterling and I think the market as a
whole is doing the same," said a London-based trader at a large
U.K. bank.
Even so, the pound held up relatively well in early European
trade, shrugging off disappointing services-sector data which
suggested the economy might contract again in the fourth quarter,
having only just escaped recession.
"We still expect a 0.4% drop [in the fourth quarter], reflecting
the combination of weak underlying output and the reversal of the
Olympics boost," said research house Capital Economics in a note to
investors.
The wider European data slate also brought more economic gloom
and reined in the euro after it printed a six-week high against the
dollar at $1.3127 in late Asian trade.
Private sector business activity in the euro zone shrank again
in November and the services sector purchasing managers' index
stood at 46.7 against a first estimate of 45.7.
Spain also sold less government bonds than planned at auction,
although yields on the debt continued to inch lower. The auction
was the country's penultimate debt sale for this year.
Meanwhile, other data showed Finland dipped into recession as
the slowdown in the euro-zone finally caught up with the Nordic
economy.
The dollar was also stronger against the Japanese yen after
overnight comments from Bank of Japan Vice-Governor Kiyohiko
Nishimura reiterated the central bank's willingness to take
measures to weaken the yen.
The Polish zloty was in focus in emerging markets ahead of the
central bank's rate decision and accompanying statement. Consensus
expectations are calling for a 25 basis point rate cut to 4.25%.
The zloty traded with a soft tone ahead of the decision.
Minutes from the Hungarian central bank's latest rate setting
meeting are due at 1300 GMT, while the Reserve Bank of New Zealand
meets to decide on rates at 2000 GMT.
At 1118 GMT, the euro was trading at $1.3085 against the dollar,
compared with $1.3095 late Tuesday in New York, according to
trading system EBS. The dollar was at Y82.18 against the yen,
compared with Y81.90, while the euro was at Y107.55 compared with
Y107.25. Meanwhile, the pound was trading at $1.6108 against the
dollar, compared with $1.6099 late Tuesday in New York.
The Wall Street Journal Dollar Index, which tracks the dollar
against a basket of currencies, was trading at 69.997, compared
with 69.911 late Tuesday in New York.
A summary of key levels for chart-watching technical strategists
is below:
Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF
Spot 1110 GMT 1.3087 82.19 1.6112 0.9290
3 Day Trend Bullish Range Bullish Range
Weekly Trend Bullish Range Bullish Bearish
200 day ma 1.2874 79.55 1.5896 0.9386
3rd Resistance 1.3172 82.75 1.6217 0.9400
2nd Resistance 1.3140 82.69 1.6175 0.9341
1st Resistance 1.3127 82.37 1.6130 0.9300
Pivot* 1.3083 81.97 1.6106 0.9268
1st Support 1.3069 82.10 1.6089 0.9241
2nd Support 1.3044 81.91 1.6050 0.9215
3rd Support 1.2997 81.71 1.6025 0.9184
Forex spot: EUR/GBP
Spot 1111 GMT 0.8124
3 Day Trend Bullish
Weekly Trend Bullish
200 day ma 0.8098
3rd Resistance 0.8165
2nd Resistance 0.8151
1st Resistance 0.8147
Pivot* 0.8124
1st Support 0.8120
2nd Support 0.8101
3rd Support 0.8060
--Dow Jones Technical Strategist Francis Bray contributed to
this story
Write to Eva Szalay at eva.szalay@dowjones.com