Thursday 4 May 2023
Last night the US Federal Reserve hiked interest rates by 25bps as widely expected with rhetoric pointing to a pause now with key part of the last statement taken out. Powell also said that rate cuts are not on the agenda atm but that hasn't stopped markets pricing them in as the second-guessing resumes. Throw in more US regional banking concerns and after initial two-way business we've seen risk appetite wobble again, USD supply, equities and oil tanking, albeit recovering in Asia.
Next CB off the ramp is the ECB today where their own 25bps rate hike is factored in but some conjecture as to whether they might spring a 50bps, one n done, surprise which has helped support the Euro in recent sessions amid mixed EZ data and rhetoric.
Equities are off their lows this morning again after yesterday's slide as per recent pattern while WTI still looks soggy and now capping into $69.50 after a rapid drop to $63.80 in thin liquidity after NY trading closed as the recesssion fear-led and general risk wobble continues as I've been warning. Gold burst up through $2080 in the post-NY thin liquidity having previously pushed up through $2040 post-FOMC but now popped back down to $2035 as natural sellers take advantage of the rally. Ukraine/Russia war continues to be the main geo-political elephant in the room ramped up now by drone attacks on the Kremlin with ongoing US/China/Taiwan tensions in the mix too and now ongoing Middle East tensions and turmoil in Sudan continuing
GBPUSD: A good hold of 1.2480-00 yesterday and a strong rally on the initial USD supply but capping into 1.2600 so far helped by USD demand returning in Asia. Some re-sells duly placed at 1.2560-80 and I remain a rally-seller on this pair. EURGBP: Capping into 0.8815 and looking to test the decent support around 0.8780-85 as we wait on the ECB.Expect more two-way business still overall and keep in mind impact on GBPUSD post ECB. GBPJPY: Capping into 170.00 potst-FOMC and a steady retreat to 168.70 amid the renewed risk wobble but finding support as equities/oil rally this mornning and helping to underpin GBPUSD.
EURUSD: Holding the pivotal 1.1030-40 area but equally capping at 1.1090 as we wait on ECB and falling back into 1.1040 as I type. 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 but not long to wait now..... USDJPY: Another USDJPY retreat to test strong support/bids between 134.30-50 amid the fragile risk sentiment and pips gratefully banked from the re-sells after failing above 135.50. I still prefer to sell rallies/be long JPY but caution still required post-BOJ in these ever-fickle markets.
More detailed analysis across a variety of pairs from mike@mspx.co.uk
Interbank rates: 08.45 BST
GBPUSD 1.2565
EURUSD 1.1065
EURGBP 0.8800
GBPEUR 1.1365
USDJPY 134.61
GBPJPY 169.12
GBPCAD 1.7068
GBPCHF 1.1158
GBPZAR 22.9511
GBPHKD 9.7774
USDCHF 0.8865
EURCHF 0.9800
EURHKD 8.6023
AUDUSD 0.6667
NZDUSD 0.6238
USDCAD 1.3607
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