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Writer's pictureMike Paterson

Wobbly risk returns ahead of FOMC

Wednesday 3 May 2023

If a week is a long time in politics then 24 hours can definitely turn things around in financial markets right now and we've seen a further wobble in risk sentiment as we wait on the US Federal Reserve later today amid concerns about US regional banks and debt ceiling negotiations. Markets pricing in a 25bps rate hike but as importantly will be the rhetoric and the jury's out on wheher they can afford to lean one way or the other

We've seen USDJPY turn lower again, dropping back below 136.00 amid some general USD supply and the JPY risk-off demand returning after the over-extended rally to 137.75. Strong jobs data in New Zealand has given NZD a lift as conjecture remains on another RBNZ rate hike especially after yesterday's surprise move by the RBA.


Equities are off their lows this morning as I type after yesterday's drop but WTI still looks very soggy and now capping at $72.00 to test $70.80-00 after yesterday's dramatic fall from $75.50 as the recesssion fear-led wobble continues as I've been warning. Gold continues to trade tightly but now popped back up to test $2020 amid the fragile risk tones. Ukraine/Russia war continues to be the main geo-political elephant in the room with ongoing US/China/Taiwan tensions in the mix too and now ongoing Middle East tensions and turmoil in Sudan escalating.

GBPUSD: A good hold of 1.2440-50 yesterday but capping at the old line of 1.2520-30 so far helped by renewed GBPJPY supply. Some re-sells duly placed at 1.2520 and I remain a rally-seller on this pair overall. EURGBP: Capping into 0.8830 after yesterday's rally from 0.8785 as the GBPJPY supply filtered through.Expect more two-way business still overall. GBPJPY: Capping into 172.30 and a steady retreat to 169.75 amid the renewed risk wobble and JPY demand capping core pairs too. What a difference a day makes....

EURUSD: Testing the pivotal 1.1030-40 area as I type amid the general USD supply after holding 1.0940-50 and some pips banked in the retreat. I remain a rally seller as my preferred side overall but equally a case for buying dips still as we continue to range. ECB conjecture continues ahead of their latest policy decision tomorrow. USDJPY: Another day, another USDJPY retreat amid the fragile risk sentiment and yes I still prefer to sell rallies/be long JPY but caution still required post-BOJ in these ever-fickle markets.

Interbank rates: 08.30 BST

GBPUSD 1.2516

EURUSD 1.1034

EURGBP 0.8825

GBPEUR 1.1340

USDJPY 135.85

GBPJPY 170.00

GBPCAD 1.7065

GBPCHF 1.1118

GBPZAR 22.9835

GBPHKD 9.7531

USDCHF 0.8895

EURCHF 0.9815

EURHKD 8.6001

AUDUSD 0.6665

NZDUSD 0.6232

USDCAD 1.3610



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