Tuesday 14 June 2022
More meltdown yesterday as the Wall StJournal’s Nick Timiraos suggested a possible 75bp hike from the Fed tomorrow saying "A string of troubling inflation reports in recent days is likely to lead Federal Reserve officials to consider surprising markets with a larger-than-expected 0.75-percentage-point interest rate increase at their meeting this week. Before officials began their pre-meeting quiet period on June 4, they had signaled they were prepared to raise interest rates by a half percentage point this week and again at their meeting in July. But they also had said their outlook depended on the economy evolving as they expected."
Cue further tumbles in equities and risk sentiment but also some renewed USD demand too as bond yields continued to climb after pausing for a little breath. We've seen equity and commodity dip demand in Asia and some USD supply but markets now will be even more nervous with the rate hike bar set even higher. Ukraine and inflation remain the very different elephants in the room as we wait on the plethora of other CB decisions this week too. Talking of which the BOJ boosted scheduled purchases of five-to-10-year debt to 800 billion yen ($6 billion) today from an expected 500 billion yen after the benchmark yield climbed to 0.255%, above the upper end of its 0.25% tolerance band.
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: A further extended retreat to look at 1.2100 amid the USD and EURGBP demand and GBPJPY supply, and since.Pips banked in the move lower from some re-sells and I remain poised to sell rallies but timing as ever is crucial. BOE meeting on Thursday pointing to a 0.25% rate hike atm. EURGBP: Rallying further to test 0.8600 after holding 0.8550 this time and helping to cap GBPUSD again but more sellers poised around 0.8620-25. Expect some two-way business as we wait to see what the BOE do/say.GBPJPY: Capping at 164.50 in the bounce from 162.20 and looking at 163.30 now as wobbly risk returns and USDJPY caps out at 134.80. Some dip demand still expected until Japan intervene on JPY weakness.
EURUSD: A solid hold of 1.0400 yesterday and early Asia helped by some USD supply but sellers poised around 1.0500 again. USDJPY: A good hold of 133.60 but failure at 134.80 suggesting some good sell interest into 135.00 again. The real reversal as/when it comes will be rapid but some dip demand still expected for the moment.All eyes on FOMC. EURJPY: A cap at 141.00 this time but support coming in at 139.50 and now testing 140.50 again. I expect rally sellers to prevail still for the moment.USDCHF: The big 1.0000 level proviong a step too far ands now in retreat to 0.9887 amid some softer USD tones but equally EURCHF supply again too. SNB ever watchful and their next meeting on Thursday very much in focus. EURCHF: Support around 1.0380 gone now and a decent slide to 1.0340 with sellers poised above 1.0400 as I warned yesterday amid the softer-risk CHF demand.
AUDUSD: Finding a cap around 0.6975 this time with AUDJPY selling notable again but holding 0.6900-10 so far. GBPAUD breaking up through 1.7550 in latest rally after holding 1.7450-75 this time. NZDUSD finding a cap at 0.6300 now but equally a good hold of 0.6200 amid the latest variable risk and USD tones. GBPNZD finding support at 1.9330-50 this time.USDCAD: Supported at 1.2850 now helped by the CADJPY selling and general USD demand and as oil price caps yet again.Seems to be on a bit of a mission higher now but FOMC in focus and 1.3000.
Let's continue to be careful out there.
Interbank rates: 08.43 BST
GBPUSD 1.2156
EURUSD 1.0476
EURGBP 0.8547
GBPEUR 1.1700
GBPJPY 165.11
GBPCAD 1.5811
GBPCHF 1.2015
GBPZAR 19.5560
GBPHKD 9.5475
USDJPY 134.30
EURJPY 141.11
EURCHF 1.0381
EURHKD 8.1602
AUDUSD 0.6930
USDCAD 1.2903
USDCHF 0.9909
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