Tuesday 7 June 2022
Recent themes prevailing with USD demand and JPY supply at pace on yield-led differential still as US 10-year bond yields rise above 3% again.. Equities remain underpinned as do gold and oil prices. Firmer risk sentiment overall therefore but Ukraine and inflation remain the very different elephants in the room.
Latest RBA rate decision last night surprised markets with a 0.5% hike which saw an initial rally in AUD only for a rapid retreat with the jury now out on a) the pace of future hikes and b) negative impact on the economy. Boris Johnson survived his no-confidence vote within his own party but the 41% opposition makes his position wobbly still to say the least and will continue to gnaw away at his ability to govern effectively.
GBPUSD: No immediate reaction on the Johnson vote having capped at 1.2580 earlier in the day but some relentless USD demand saw a move down to test 1.2430 only tempered by GBPJPY demand but equally that demand once again helping to push the pair back above 1.2500 as I type. I remain poised to sell rallies but timing as ever is crucial. EURGBP: Failing above 0.8580 this time and now retreating into yesterday's 0.8520-40 support area as some GBP demand prevails. More two-way business expected.
GBPJPY: Now Underpinned at 165.00 on the continued JPY supply rallying above 166.00 and renewed GBP demand double whammy.
EURUSD: Failure at 1.0760 again yesterday as USD demand prevailed but holding 1.0660 in the retreat. USDJPY: Capping at 133.00 in the extended rally to post 20-year highs and now underpinned at 132.00 now amid the yield-led JPY supply/USD demand double whammy. EURJPY: A further surge to 142.00 amid the general JPY supply with a base now around 141.00. USDCHF: USD demand/yield differential kicking into this pair now and testing 0.9750. SNB shadow lurking in the dips still but having their work done for them atm. EURCHF: Now holding 1.0370 and pushing up through amid the general CHF supply but rally sellers will continue to lurk in expectation of potential rate tightening.
AUDUSD: Finding a cap into 0.7250 post-RBA but holding 0.7175 on the rapid retreat. GBPAUD held 1.7300 again by and large post-RBA. NZDUSD underpinned at 0.6440 where we have option interest nearby today after failing into 0.6500. GBPNZD finding support at 1.9300 this time. USDCAD: Supported at 1.2550 still amid firmer USD but capped again by firmer oil/CADJPY demand. I still prefer rally sells for the moment.
Let's continue to be careful out there.
Interbank rates: 08.32 BST
GBPUSD 1.2482
EURUSD 1.0693
EURGBP 0.8566
GBPEUR 1.1672
GBPJPY 165.58
GBPCAD 1.5750
GBPCHF 1.2174
GBPZAR 19.2590
GBPHKD 9.7375
USDJPY 132.66
EURJPY 141.84
EURCHF 1.0410
EURHKD 8.3420
AUDUSD 0.7190
USDCAD 1.2600
USDCHF 0.9734
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