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  • Writer's pictureMike Paterson

All change as softer risk tones return and markets wait on Powell

Wednesday 22 June 2022

Markets and traders still making their mind up but we're now seeing some softer risk tones so far in Asia and early Europe with equities falling and JPY demand notable again although with USD still underpinned overall.

Fed Chair Powell delivers his Semi-Annual Testimony before the Senate at 13:30 GMT. Comments should be relatively consistent with those at the FOMC presser, although there could be some slightly hawkish tones if he makes it clearer that 50bps hikes are the new norm or if he puts 100bps hikes on the table in case future inflation data continues to surprise to the upside. Later Fed's Evans speaks on Economic Outlook at 16:50 GMT and Harker and Barkin are on the agenda at 17:30 GMT.

UK CPI data brought a slightly softer core print at 5.9% vs 6.0% expected but headline CPI/RPI/PPI all a concern still. Pound little changed but lower overall on the softer risk tones and some revised expectation on BOE rate hikes.

As ever, deal on fact not second-guessing. Be ready with your preferred levels/strategy, place orders and let the algos do the heavy work. Discipline is key as always but equally hesitation can often ruin a great idea.

GBPUSD: Finally broken down through 1.2220-30 on the softer risk GBPJPY supply adding to some USD demand generally. Keeping core shorts and remain poised to sell rallies but timing as ever is crucial.EURGBP: Holding 0.8585 now but but capping at the old 0.8625 levels so far as jury remains out and plenty of second-guessing the ECB and BOE still.GBPJPY: 168.00 then 167.00 the new caps but holding 165.75 in the softer risk/retreat which has dragged core pairs lower too. I think the variable risk tones will help to keep contained still.

EURUSD: 1.0520 support broken but equally finding more dip demand at 1.0465 amid the two-way business this morning. Sellers poised around 1.0520 now amid the cross flows/risk/USD variables. USDJPY: Currently finding support into 136.00 but capped at 136.75 with help from the softer risk JPY demand returning. Dip demand still expected for the moment.EURJPY: Finding a base at 142.00 now amid the firmer risk tones and some general EUR demand this morning too. Rally sellers poised still when sentiment turns but looks underpinned for the moment. USDCHF: Sellers still poised into 0.9700 but support around 0.9660 still then 0.9630 as jury remains out on SNB and amid variable risk. EURCHF: Failing above 1.0200 again amid softer risk tones but holding the 1.0130 support line so far as markets continue to evaluate the SNB position

AUDUSD: Yesterday's cap at 0.6980-85 ahead of the shadow of large option expiries at 0.7000-10 as I warned and now back below 0.6900 helped by the earlier AUDJPY supply. GBPAUD testing 1.7650 again and now posting 1.7750 as GBPUSD rally outstrips AUDUSD. NZDUSD in retreat still amid the NZDJPY supply and testing 0.6250 as I type. GBPNZD finding support at 1.9450 this time and now posting 1.9550. USDCAD: Supported at 1.2950 now after the fall to test 1.2900 . Some CADJPY supply and softer oil helping to underpin.

Let's continue to be careful out there.

Interbank rates: 08.45 BST

GBPUSD 1.2180

EURUSD 1.0500

EURGBP 0.8612

GBPEUR 1.1610

GBPJPY 166.09

GBPCAD 1.5874

GBPCHF 1.1825

GBPZAR 19.5437

GBPHKD 9.5233

USDJPY 136.21

EURJPY 143.05

EURCHF 1.0160

EURHKD 8.2026

AUDUSD 0.6900

USDCAD 1.2990

USDCHF 0.9671

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