BOE cuts rate. NFPs now in focus

Friday 2 August 2024

Yesterday duly brought a 25bps rate cut from the BOE but it was a close call with a 5-4 vote.. Initial GBP selling on the headline but then a more cautious press conference lent support to the Pound along with EURGBP supply and GBPJPY demand amid a rising USDJPY. Later in NY though it was all about the lack of risk appetite as markets finally seemed to realise there's a very fragile world out there.

Cue JPY and CHF demand as equity markets tumbled and that brought GBP fragility back into attention and we've seen GBPUSD retreat into 1.2700 after failing into decent offers/resistance around 1.2830 yesterday in the post-BOE rallies. Today's data slate brings the key US Non-Farm Payrolls and we can expect further volatility.

While the CB, political and USD second-guessing continues remember as always to identify your preferred risk reward levels and let the algos do their thing along with the natural and speculative flows. Don't get greedy or over-analyse.

Equity markets globally have tumbled amid the risk-off sentiment with the Nikkei falling over 5%. Rally sellers/proft takers still poised but the recent declines triggering stops too. WTI support coming in at $75.90-00 again helped by rising tensions in the Middle East after the risk-off retreat from $77.50 this time. Gold has found some dip demand into $2435 this time amid the fragile risk tones but with rallies capped by more profit-taking between $2460-70 for the moment. Dip demand should remain but profit-takers/sellers still poised.

GBPUSD: Capping above 1.2830 yesterday post-BOE and was looking supported in the dips through other cross flows but ultimately had the spotlight shone back on it and renewed supply via risk-off GBPJPY and GBPCHF selling to drag down toward 1.2700. Also helped by EURGBP holding 0.8420 where we had the large option interest and finally breaking up through 0.8460 resistance. I prefer rally-sell side still overall but patience as ever a virtue. EURGBP: Holding 0.8420 yesterday where we had that decent option interest and finally breaking up through 0.8460 to test 0.8500 on the GBP selling elsewhere and currently still underpinned. ECB/BOE rate cut conjecture contines. GBPJPY: Yet another rollercoaster ride unsurprisingly amid the JPY and GBP moves elsewhere but this pair remains the core risk-trade vehicle for hedge funds and a therefore a main driver in itself which we definitely saw again yesterday. Capping at 193.00 and a retreat to 189.00 with plenty of two-way in between.

EURUSD: Still ranging tightly amid the variable cross and USD flows.Fresh lows of 1.0778 yesterday but equally capping at the lower 1.0820 area. USDJPY: Lots of two-way business and hence volatility again yesterday amid the USD and risk variables. Support coming in near the previous lows of 148.50 after failing at 150.80-90. Expect more two-way, especially with NFP fallout but entry level/patience is key as always.

Traders - For more detailed analysis across a larger number of FX pairs including market order flows and options expiries email mike@mspfx.co.uk