Thursday 14 December 2023
Last night the US Federal Reserve kept rates on hold as expected but surprised even the doves with the level of rhetoric whereby they said they were more open to easing and had discussed when to start cuts. Chairman Powell further said they were aware of the risk that "we would hang on too long” before lowering rates and were “very focused on not making that mistake.”
Throw in their latest "dots" charts which showed more dovish tones and implying 75bp of rate cuts over 2024 and we saw a USD sell-off with USDJPY leading the way again and further in Asia/early European trading but moves will be slightly tempered by the fact we have more central banks stepping up today with SNB just announcing rates on hold as expected but slightly more dovish than recently with press conference to come shortly then BOE (12.00 GMT) and ECB (13.15 GMT) today followed by BOJ next Tuesday. Norges Bank meanwhile has just hiked rates by 25bps. The ongoing Middle East back-story sadly continues meanwhile and casts its own shadow over markets but still not driving prices.
Equities rallied in NY yet again post-FOMC but currently off their highs in Asia/early European trading with the jury still out on the speed of cuts by FOMC plus some profit-taking. WTI has capped at $70.70 this morning as sellers remain poised amid global demand concerns after holding $68.50 yesterday. Gold jumped back up through $2010 post-FOMC and currently $2038 amid the US rate cut speculation.
GBPUSD: Holding 1.2500 yesterday then jumping up through 1.2620 post-FOMC after wiping its feet at 1.2600 where we had some decent offers that I'd highlighted. Capping at 1.2660 so far helped by GBPJPY supply and EURGBP demand. Good size options very much in play at 1.2640 and 1.2660 through the BOE fallout. I remain poised for further rally sells when momentum fades. EURGBP: Support at 0.8600 this time as EURUSD rally outpaced GBPUSD but jury still out with both BOE and ECB in play for the moment plus other cross flows. GBPJPY: Capping at 182.00 amid the JPY demand/GBP cross supply double whammy but holding 178.30 this time.
EURUSD: Support around 1.0780 again before the post-FOMC spike into 1.0900 but now capping at 1.0920 as we wait on the ECB. I remain a rally seller overall. Lots of options in play through the ECB today. USDJPY: Capping at 145.00 before plummeting to 143.00 in the immediate move post-FOMC and moving lower since to test 141.00. I remain a rally seller as preferred side overall at these still elevated (albeit slightly more balanced) levels. Conjecture remains on any BOJ move next week.
For more detailed analysis across a variety of pairs email mike@mspfx.co.uk
Interbank rates: 08.23 GMT
GBPUSD 1.2627
EURUSD 1.0896
EURGBP 0.8629
GBPEUR 1.1587
USDJPY 141.65
GBPJPY 178.90
GBPCAD 1.7040
GBPCHF 1.1032
GBPZAR 23.4857
GBPHKD 9.8543
USDCHF 0.8713
EURCHF 0.9497
EURHKD 8.4878
AUDUSD 0.6712
NZDUSD 0.6218
USDCAD 1.3454
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