Wednesday 24 May 2023
No deal yet from the Biden/McCarthy US debt ceiling talks and with June 1st as the perceived deadline there's still some concerns understandably with some softer risk-tones notable again this morning as European trading gets underway.The RBNZ raised interest rates by 25% but signalled this was the end of the hiking cycle with cuts coming end-2024. The news disappointed the hawks and we've seen NZD tumble with the hike already factored in too. NZD move lower amid lower NZ bond yields also put pressure on AUD too with both currencies already looking soft in recent times.
UK inflation data this morning showed a welcome reduction in the y/y headline CPI and RPI but more disturbingly showed core CPI still very much an issue and up to the highest levels in 38 years contrary to BOE's Bailey saying the trend had turned in his testimony to UK lawmakers yesterday. Markets now fully pricing in a peak BOE bank rate of 5.25% with an 80% chance of 5.5%. GBP jury out but higher rates will simply squeeze an already fragile economy lower. German IFO data just out notably softer too.
Equities are in further retreat this morning after yesterday's fall in the US over the debt talks stand-off overall but WTI has broken back up above $73.50 after holding $71.50 amid some technical support and testing key $73.80-00 resistance despite global economic growth concerns continuing. Gold is back up through $1970 amid the generally softer risk sentiment after holding the strong $1950 support area again but capping at $1980 so far.Increasing tensions in the Ukraine/Russia war continue to be the elephant in the room as the world remains a fragile place.
GBPUSD: Failure at 1.2470 yesterday again this morning with risk-off GBPJPY supply returning and some re-sells placed post-CPI data after yesterday's good hold of 1.2375. Now finding support at 1.2400 but I remain a rally seller as my preferred side. EURGBP: Holding 0.8650 support this morning the UK data-led fall and now breaking through 0.8680 as core pairs range still. Expect some two-way business overall again. GBPJPY: Capping at 172.80 in the UK data-led spike but holding 171.80 in the dip again from whence it came. Rally sellers ever-poised but dip demand expected too for the moment as USDJPY remains underpinned.
EURUSD: Capping into 1.0800 yesterday amid the USD demand but holding 1.0760 as we continue to range tightly. I remain a rally seller as my preferred side. USDJPY: Still looking underpinned overall amid the general USD demand after capping at 138.90 this time but holding 138.25 in the retreats. I still prefer to sell rallies/be long JPY overall but ongoing caution/patience required as I've been warning.
More detailed analysis across a variety of pairs available from firstname.lastname@example.org
Interbank rates: 08.20 BST