Friday 15 December 2023
Yesterday's decisions by the BOE and ECB to keep rates on hold were as expected but now markets are second-guessing the level/speed of rate cuts next year on both, particularly in the wake of US Fed Chair Powell's remarks on Wednesday.
On first sight it appears that the BOE will be slightly less keen on rushing into cuts but that will still be data-dependent and on that note some soggy EZ PMI releases this morning has tipped the scales on ECB cuts and we've seen some notable EUR supply in a rush in the past hour or so.
Yesterday's rhetoric from the SNB was slightly more dovish than in recent comments but still not in a rush to talk about lowering rates. Next central bank off the rank is the BOJ on Tuesday and the conjecture remains on them taking the tightening route. The ongoing Middle East back-story sadly continues meanwhile and casts its own shadow over markets but still not driving prices.
Equities are on the rise still post-FOMC and currently on their highs generally in early European trading with the jury still out on the speed of cuts by FOMC. WTI has capped at $72.70 this time as sellers remain poised amid global demand concerns but holding the higher level of $71.70 yesterday and again this morning. Gold has capped above $2045 but remains underpinned at $2025-30 amid the US rate cut speculation.
GBPUSD: Holding 1.2650 yesterday then jumping up through 1.2700 in the post-BOE aftermath after the less dovish than expected tones and markets still happy to sell the Greenback. Capping into 1.2800 so far helped by GBPJPY supply and now 1.2745. Some good jobbing opportunities and I remain poised for further rally sells when momentum fades. EURGBP: Good two-way business as expected amid the BOE/ECB fallout with support at 0.8585 this time but capping into 0.8630.General EUR supply weighing again this morning. GBPJPY: Capping into 182.00 still amid the general JPY demand but holding 180.00 this time. Sellers remain poised. BOJ in focus still.
EURUSD: Support around 1.0950 in this morning's retreat where we also have decent option interest today after yesterday's extended rally into the congested 1.1000 area where we also had those large options rolling off. I remain a rally seller overall. Markets will continue to guess on speed of ECB cuts. USDJPY: Good two-way business capping into 142.50 but holding 141.40 and 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: 08.45 GMT
GBPUSD 1.2751
EURUSD 1.0950
EURGBP 0.8592
GBPEUR 1.1635
USDJPY 141.66
GBPJPY 180.63
GBPCAD 1.7060
GBPCHF 1.1065
GBPZAR 23.1855
GBPHKD 9.9323
USDCHF 0.8666
EURCHF 0.9496
EURHKD 8.5255
AUDUSD 0.6718
NZDUSD 0.6221
USDCAD 1.3375
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