British pound recovered heavy losses from late US session, when it tumbled to 1.2087 low, on investors’ rising fears about the impact on Britain from leaving the European Union. The pound was top loser of US session and the top winner of Asian session, as it bounced back to 1.2300 zone, gaining 1.5% for the session. Sterling received strong support from Bloomberg report that British PM Theresa May has accepted that Parliament should be allowed to vote on her Brexit plan. This gives short-term boost to the pound, but investors are not sure if it will last longer.
Quick rebound after sharp fall in late Tuesday was logical and traders expect pound to spend some time in consolidation in 1.2300 are, however, firmly bearish technicals, as well as fundamentals, maintain strong negative sentiment that could lead towards retest of 1.2000 support zone, with further weakness not ruled out.
Fresh weakness of the US dollar against British pound in early Wednesday’s trading also affected other dollar’s counterpart currencies.
The dollar Index slipped from late Tuesday’s high at 97.72 to 97.747 in Asia, losing around 0.25% for the session.
However, the greenback holds overall positive tone on expectations that the US Federal Reserve would raise interest rates by the end of the year and widening lead of Democratic presidential nominee Hillary Clinton against her Republican rival Donald Trump.
The dollar dipped to 103.15 low against yen on Tuesday, after repeated upside rejection above 104.00 barrier, but regained ground in Asia on Wednesday, gaining 0.39% for the session, on bounce to session high at 103.66.
The Euro remains under strong pressure, following strong losses in past two days that met initial target at 1.1045 and dipped to fresh 2 ½ month low at 1.1030. The single currency maintains negative tone for final attempt towards targets at 1.1000 and 1.0950, with early Wednesday’s trading being entrenched within narrow range and hovering around 1.1050 mark.
Australian dollar was also higher on Wednesday, benefiting from US dollar’s near-term weakness. Aussie bounced from three-week low at 0.7528 to 0.7590 in Asia, gaining 0.8% for the session. The other antipodean currency, New Zealand dollar, was up in Asia, gaining around 0.6% for the session, but showing less momentum for more significant action higher, as it fell nearly 2% in past two days.
Commodities benefited from dollar’s weakness in Asia, with Gold bouncing to session high at $1257, up 0.56% for the session and spot Silver gaining 0.92% overnight.
Gold is waiting for the minutes of Fed last policy meeting, due later today, which is expected to give more hints about US central bank’s next steps. Gold is sensitive to moves in US rates and recent rising hopes of Fed’s rate hike, kept yellow metal under strong pressure that resulted in sharp fall of nearly 7.5% in past two weeks.
Crude oil prices rebounded slightly on Wednesday but remain under fresh highs posted on Monday, awaiting US weekly crude stocks API and EIA data that will be delayed by one day because of US holiday that was on Monday.
Oil maintains positive sentiment on initial agreement of production cut by OPEC and Russia, which will require verification on next OPEC meeting.
Asian shares slipped and hit three-week lows on Wednesday, maintaining negative sentiment from America, after US stocks were knocked by disappointing start of Wall Street’s earning season.
MSCI Index was down 0.4%; Nikkei 225 slipped 0.9%; Singapore was down 0.4%.

Highlights of the day

Europe
Industrial production data from the Eurozone is in focus of European session. Forecast shows strong rise in industrial output, as consensus for August is 1.5% vs -1.1% in July. Upbeat release will give strong signal of recovery of Eurozone’s economy.
Data is due at 09:00 GMT.

America
The FOMC will report its meeting minutes and economic forecast from its meeting on September 20-21, in which the committee decided to leave interest rates unchanged, and to maintain the target range for the federal funds rate at 0.25 to 0.5%. Central bank chief, Janet Yellen, was hawkish, commenting that the case for a hike in interest rates has increased, but will “wait for further evidence of continued progress” before making a decision.
It is likely that the rate hike will come on the FOMC meeting on December 13-14 , as the November session comes just before the presidential election – and a post-meeting press conference has not been scheduled.
Data is due at 18:00 GMT.

Important levels
GBPUSD
Strong fall on Tuesday was followed by quick recovery in early Wednesday’s trading, after the pair initially dipped to 1.2087 low and recovered losses on bounce above 1.2300 handle. Overall sentiment and studies remain negative and see scope for further weakness, as psychological 1.2000 support has been already cracked on last Friday’s sharp fall.
Initial resistances lay at 1.2323/57; followed by 1.2401 and 1.2442 and pivotal 1.2500 barrier. On the downside, 1.2200 marks initial support, ahead of 1.2177 and key levels at 1.2087 (yesterday’s low) and psychological 1.2000 support.
EURUSD
Steep two-day descend cracked initial support and eyes psychological 1.1000 level. Bears found temporary footstep at 1.1030, with narrow consolidation under way. Initial resistances lay at 1.1070/1.1100, ahead of strong 1.1122 barrier (former base) and 1.1140.
Supports lay at 1.1030 then 1.1000 and key 1.0950/09 m/t support levels.
Dow Jones (Dec)

Sharp fall on Tuesday shifts focus lower and eyes the lower boundary of short-term congestion at 17960. Today’s action holds above 18000 support for now, with fresh weakness expected to attack 17960 and possibly to extend to key short-term support at 17824.
Initial resistance lies at 18120, followed by 18146 and 18186., Market Analysis