Friday 28 April 2023
The Bank of Japan this morning tweaked forward guidance but that hawkish tone was offset by them saying they will not hesitate to take "additional easing if necessary". Moreover, the expected policy review will take 1-1.5 years, much longer than markets had expected but equally Ueda said that doesn't rule out tweaks meanwhile. JPY hawks, including me, disappointed by the outcome and we've seen USDJPY run up to 135.85 albeit after a rapid dip into 133.40 prior. US Federal Reserve next central bank up the ramp on Wednesday.
Month-end signals still suggesting a balanced USD position and today's final London fix shouldn't spring too many surprises. EURJPY demand still notable with some general corporate EUR demand also helping the JPY selling but in retreat as I type after some soft regional German CPI and GDP data this morning. US GDP data yesterday had a soft headline but core detail sent the Greenback higher.
Equities are in retreat again this morning as I type after a solid performance yesterday and in Asia but technical resistance levels helping to cap. WTI has now capped at $75.50 as the recesssion fear-led retreat continues and testing $74.00 again. Gold continues to trade tightly now, within a $1975-2005 range amid the fragile risk tones but with talk of CB selling to cover debts elsewhere capping rallies. Ukraine/Russia war continues to be the main geo-political elephant in the room with ongoing US/China/Taiwan tensions in the mix too and now ongoing Middle East tensions and turmoil in Sudan escalating.
GBPUSD: Yet another cap above 1.2500 in Asia after a good hold of 1.2430 again yesterday and some re-sells dully placed per ongoing strategy and I remain a rally-seller on this pair overall. Demand coming from GBPJPY buying and EURGBP selling. EURGBP: Capping into 0.8870 yesterday then 0.8840 in Asia as EUR supply returns and EURUSD heads back below 1.1000 once again but underpinned into 0.8800-10 with some EUR month-end dip[ demand still.Expect more two-way business overall. GBPJPY: Capping into 169.50 this morning on the BOJ and risk-led rally from 166.50 and providing support to GBPUSD too.
EURUSD: Breaking back down through the pivotal 1.1030-40 as month-end EUR demand dries up and now a test of 1.0980 amid the soft German data this morning. Large option contract interest rolling off at 1.1000 in play too. I remain a rally seller as my preferred side overall but equally a case for buying dips still as we continue to range. ECB conjecture continues. USDJPY: Lots of fun n games leading into the delayed BOJ announcement but holding 133.30-50 and now highs of 135.85.We can expect some dip demand into 135.00-30 but I continue to favour rally sells overall with hedges elsewhere. BOJ policy will continue to cast a shadow moving forward.
More detailed analysis across a variety of pairs from mike@mspfx.co.uk
Interbank rates: 08.45 BST
GBPUSD 1.2469
EURUSD 1.0990
EURGBP 0.8815
GBPEUR 1.1345
USDJPY 135.75
GBPJPY 169.00
GBPCHF 1.1188
GBPZAR 22.9192
GBPHKD 9.7063
GBPCAD 1.7020
USDCHF 0.8960
EURCHF 0.9850
EURHKD 8.5556
AUDUSD 0.6588
NZDUSD 0.6133
USDCAD 1.3645
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