Friday 17 June 2022
After the Fed's 0.75% rate hike as expected and then the SNB raise of 0.5% which was far less expected the Bank of England yesterday erred on the side of caution and hiked by just 0.25% and now the BOJ have left rates on hold but with a nod to FX levels. Meanwhile reports emerged from the ECB that Lagarde has told EU fin mins that the goal is to "normalise" bond spreads not close them which followed on from comments from Visco that the normal spread between German and Italian bonds is 100-150 bps. Not happening at the moment...
The Pound's initial retreat was shortlived as markets started to factor in future rate hikes given the BOE left the door open and we saw a rally amid some general USD supply. That same USD selling had also seen USDJPY drop steadily to test 131.50 amid some risk-off JPY demand but equally we've had a sharp move to 134.50 from 132.50 post-BOJ but also some good two-way business since amid those comments on Yen levels.
After this lively and interesting week we might expect a pause for breath today but equally don't rule out some end-of week volatility as markets continue to second-guess the central banks. On that note Fed's Powell making welcoming remarks at an event from 12.45 GMT. For my part I'm sending this early to head out to a music festival after getting up to trade the BOJ. Monday's report may come to you a little later than usual depending on when I return.
As ever, deal on fact not second-guessing. Be ready with your preferred levels/strategy, place orders and let the algos do the heavy work. Discipline is key as always but equally hesitation can often ruin a great idea.
GBPUSD: Some decent two-way business around the BOE and some pips banked before a sharp rally to 1.2400 during which I had to abort some re-sells along the way but was part-hedged by the existing USDJPY shorts. I'm still holding shorts from 1.2350+ and remain poised to sell rallies but timing as ever is crucial. EURGBP: Holding 0.8500-10 in the extended retreat from 0.8635 in the GBP rally post-BOE but capping around 0.8560 since as jury remains out and plenty of noise coming out of the ECB.
GBPJPY: This was always going to be a lively 24 hours given the two CB variables and I've warned that it's heavily traded by hedge-funds as a risk management tool. Softer risk tones and initial GBP disappointment saw a test of 160.00 but then a good rally to 163.00 basing there before the post-BOJ move to 165.75 in a rush before retreating.
EURUSD: 1.0380 support yesterday but equally a solid cap at 1.0600 since and now 1.0522 amid all the cross flows/risk/usd variables and the ECB comments. USDJPY: Per my opening summary a roller-coaster ride on USD/risk variables and the BOJ combo. 131.50 holding the initial falls but equally capping around 134.50 post-BOJ before some good two-way business. Some dip demand still expected for the moment.EURJPY: Finding a base at 138.00 before the solid rally to 141.75.Sellers still poised on softer risk sentiment as/when it returns each time. USDCHF: A further slide to 0.9630 post-SNB before rallying but sellers still poised into 0.9700-50. SNB have opened a can of worms so let's see how they deal with it. EURCHF: An old support line of 1.0130 holding yesterday but struggling to mke much progress above 1.0200 as markets continue to evaluate yesterday's move by the SNB (who equally trying to evaluate the fall-out too !)
AUDUSD: Getting a leg-up from 0.6950 with the help of some AUDJPY demand post-BOJ this morning but capping into 0.7075. GBPAUD capping around 1.7650 after the GBP-led rally from 1.7300 but now 1.7500 again. NZDUSD finding a good hold of 0.6300 this time but capping at 0.6400 amid some general USD demand and NZDJPY rally supply. GBPNZD finding support at 1.9300 again then 1.9350 after capping at 1.9500 in a roller-coaster ride. USDCAD: Supported at 1.2880 now and rallying back to 1.2960 but capped by some CADJPY demand since the initial post-BOJ supply.
Let's continue to be careful out there.
Interbank rates: 05.24 BST
GBPUSD 1.2293
EURUSD 1.0521
EURGBP 0.8558
GBPEUR 1.1683
GBPJPY 164.89
GBPCAD 1.5915
GBPCHF 1.1900
GBPZAR 19.6657
GBPHKD 9.5662
USDJPY 134.14
EURJPY 141.12
EURCHF 1.0202
EURHKD 8.1874
AUDUSD 0.7020
USDCAD 1.2954
USDCHF 0.9700
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