Thursday 2 November 2023
Last night the US Federal Reserve left interest rates on hold but Chair Powell made it clear that they're not ruling out a further hike and focus remains on getting inflation down to 2%. Fresh reference made to tighter financial conditions is a nod to the rise in US bond yields and they rule out discussion on interest rate cuts anytime soo=n. Having said that there were some cautious tones too ahinting that the hiking cycle was near its end. Cue limited USD impact as markets continue to digest and second-guess but a little supply prevailing overall as bond yields retreat.
The tragic Middle East back-story sadly continues but markets are now also focussed on the latest decision from the Bank of England today, the FOMC fallout and tomorrow's key US NFP jobs/wages data. BOE expected to keep rates on hold and also remain cautious as inflation not going away anytime soon but not having the robust economic data backstory we're seeing in the US atm. Keep an eye on the vote as always.
Equities have been generally steadier post-FOMC amid the variable fragile risk sentiment overall still but in retreat again this morning. WTI capping at $83.00 again amid the uncertain global economic picture too and testing $80.00 this time before finding support. Gold capping at $1995 this time as risk firmed a little with natural sellers ever poised still but has found support around the $1970. Geopolitical concerns still very much a threat to market stability with focus on increasing Ukraine/Russia tension and now with the Middle East sadly to the fore.
GBPUSD: Support at 1.2100 agai in yesterday's extended retreat amid some USD and GBPJPY demand but another failure at the strong 1.2180-00 area that I warned about as we continue to range tightly amongst all the unknowns including the BOE today .I remain poised for further entries when momentum fades. EURGBP: Holding 0.8685 yesterday and now back up through 0.8700 as GBPUSD caps at 1.2200. Ranging still overall amid core pair fluctuations and BOE. GBPJPY: Holding 183.00 in the retreat post-FOMC but capping at 183.60 with rally sellers ever poised still amid the fragile risk but some caution required atm.
EURUSD: Support at 1.0520 this time in the extended retreat but capping at 1.0600 as we continue to range. I remain a rally seller overall. Options very much in play today. USDJPY: Initial move lower on FOMC to test 150.60-80 before a brief rally only to fall again to look at 150.20 amid USD supply before finding some better risk JPY supply but capping into 150.50. MOF/BOJ intervention fears still there but should remain underpinned for the moment. I remain a rally seller as preferred side overall at these elevated levels.
For more detailed analysis across a variety of pairs email mike@mspfx.co.uk
Interbank rates: 06.45 GMT
GBPUSD 1.2176
EURUSD 1.0596
EURGBP 0.8701
GBPEUR 1.1489
USDJPY 150.40
GBPJPY 183.11
GBPCAD 1.6831
GBPCHF 1.1002
GBPZAR 22.5247
GBPHKD 9.4804
USDCHF 0.9041
EURCHF 0.9579
EURHKD 8.2435
AUDUSD 0.6422
NZDUSD 0.5880
USDCAD 1.3835
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