Wednesday 20 December 2023
This morning brought UK inflation data that came in below expectations and has put a bit of a dent in recent BOE perception of a higher for longer strategy at least relative to ECB and FOMC. Forecasts for rate cuts have now been brough forward to May but Core CPI was still above 5% and that's higher than those two so the fall in GBP has been contained as the Central Bank second-guessing continues.
Yesterday I warned that "JPY hawks won't be completely disheartened" by the BOJ's lack of action and that USDJPY should cap around 145.00 where we had offers building, and so it came to pass. General USD supply also prevailing, notable in commodity currencies with CAD leading the way after some stronger Canadian CPI data. In Asian trading the PBOC left rates on hold amid a quiet session overall.
An advance warning that Friday will be the last update from me this year. I'll be taking a break next week and returning 1/2 Jan.
Equities rallied in NY trading again but capping in Asia and falling in early European trading with the jury still out on the speed of cuts by FOMC et al and some further profit-taking. WTI has capped at $74.90 this time as sellers remain poised amid global demand concerns but holding the higher level of $73.50 then $73.80 this morning amid the ongoing Red Sea interruption concerns. Bids: $73.80-00, $73.30-50, $72.80-00, $72.50-60, $72.00. Offers: $74.80-00, $75.50-60, $76.00, $75.50-60, $76.00. Gold has based at $2035 this time and still underpinned but capping at $2045 as we continue to range tightly amid the US rate cut speculation.
GBPUSD: Holding 1.2650 in this morning's retreat post UK data after capping at 1.2760 yesterday. Some good jobbing opportunities again and I remain poised for further rally sells when momentum fades. EURGBP: Good two-way business yesterday as expected amid the BOE/ECB rate cut speculation but a sharp rally through the 0.8650 resistance before capping at 0.8670 but holding 0.8650 so far amid some general GBP supply as the BOE/ECB jury remains out. GBPJPY: Capping at 184.00 then 183.50 amid the general JPY demand as USDJPY failed at 145.00 and then the GBP selling forcing a further sharp retreat before holding 181.40. Rally sellers remain poised.
EURUSD: Support at 1.0950 in the latest retreats after capping into 1.0990 amid all the CB conjecture and cross flows. I remain a rally seller overall. Option contracts in play today/tomorrow. USDJPY: Finding support at 143.30 amid some general USD demand again after yesterday's cap at 145.00 and subsequent retreat and I hope my steer helped. I remain a rally seller as preferred side overall at these still elevated (albeit slightly more balanced) levels.
For more detailed analysis across a variety of pairs email mike@mspfx.co.uk
Interbank rates: 08.50 GMT
GBPUSD 1.2654
EURUSD 1.0956
EURGBP 0.8657
GBPEUR 1.1553
USDJPY 143.42
GBPJPY 181.56
GBPCAD 1.6875
GBPCHF 1.0906
GBPZAR 23.1351
GBPHKD 9.8621
USDCHF 0.8614
EURCHF 0.9442
EURHKD 8.5386
AUDUSD 0.6766
NZDUSD 0.6284
USDCAD 1.3335
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