Thursday 21 March 2024
Last night saw the US Federal Reserve keep interest rates on hold as expected with the infamous dot plan still pointing to 75bps in cuts this year and that was enough to send the Greenback lower led by USDJPY given the recent (over) buying. Further retreat in Asia for USD pairs again led by USDJPY with plenty of MOF/BOJ comments helping initially but then markets absorbed once again and we've seen a decent USD rally since.
That rally was definitely exacerbated in USDCHF this morning after the SNB duly delivered a 0.25% rate cut that I had been warning about here all week which saw the pair surge to test 0.8980 from 0.8870 amid CHF supply across the board. SNB statement pointed to another possible cut in June and that has helped sustain the move.
So next CB off the rank is the BOE at 12.00 GMT with a rate hold expected but much as always will depend on how the voting goes and the accompanying rhetoric. Markets currently pricing in rate cuts to start in August but will the MPC be more encouraged by recent inflation data? Not long until we find out. Softer than expected Service PMI just out meanwhile. The Ukraine/Russia war and Middle East Israel/Hamas/Houthi/Hezbollah/Red Sea tensions still cast their own shadow.
Equities remain underpinned overall on the firm belief that interest rates will be generally coming down at some stage soon and steady still this morning. WTI has now fallen back through $81.50 after capping at $82.60 but holding $80.80 before a cap at $81.80 amid the second-guessing on Red Sea/Gaza, CBs and global economy. Gold held $2150 again and surged post-FOMC to new record highs above $2220 amid the softer interest rate outlook.
GBPUSD: Holding 1.2680-00 yesterday and once those 1.2700 options rolled off we saw a solid rally amid the USD supply both pre and post-FOMC before duly capping round 1.2800. I remain poised for further re-sells when momentum fades. EURGBP: Ranging still as the BOE/ECB debates continue and with BOE looming today. GBPJPY: An up n down ride through the FOMC and then falling again amid the Asian rhetoric but holding 192.40 after capping at 193.50-60 a couple of times. Sellers will remain poised amid MOF intervention conjecture.
Traders - For more detailed analysis across a larger number of FX pairs including market order flows and options expiries email mike@mspfx.co.uk
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