Fed on hold, bring on the BOE

Thursday 31 July 2024

After a lively day dominated by JPY flows we got the latest US Federal Reserve decision last night. Rates kept on hold as expected but some dovish tones from the statement backed up by Powell in the presser which has markets pricing in a September cut. Initial move brought USD demand but then USDJPY once again led the way and tumbled from 151.20 helping to cap core pairs elsewhere through JPY cross flows. Seeing more of that as I type.

This morning it's the turn of the BOE to deliver their latest decision with markets pricing in a 25bps cut and that's been reflected in some additional GBP supply in the past couple of hours that's seen a fall below 1.2800 for GBPUSD. I'm not convinced they'll cut but there's good enough reason for markets to be pricing it in. Beware upside risk therefore if it doesn't happen.

Today's data slate has brought some mixed EZ PMI numbers ahead of US weekly jobless claims and then the key US Non-Farm Payrolls tomorrow.

Mixed moves in US and European equity markets again with rally sellers/proft takers still poised. WTI  support coming in at $76.00 helped again by rising tensions in the Middle East and a strong rally before capping around $78.30-50 so far. Gold has found some dip demand into $2420 this time amid fragile risk tones but with rallies capped by more profit-taking between $2450-60.

GBPUSD: Capping above 1.2860 yesterday posr-FOMC helped by GBPJPY supply after another hold of 1.2820 but a rapid fall this morning as GBPJPY supply dominates again and markets get more excited about a BOE cut.  Currently holding 1.2775-80 helped by a EURGBP retreat from 0.8460. BOE in focus. EURGBP: Holding 0.8420 where we have some decent option interest again today but capping into 0.8460 and currently in retreat. ECB/BOE rate cut conjecture contines too. GBPJPY: Yes folks, another rollercoaster ride unsurprisingly amid the USDJPY moves and variable risk tones and testing 191.00 after capping around 196.00.

EURUSD:  Finally a break this morning of decent technical support around 1.0800 after failing above  1.0830 again amid the variable cross and USD flows. Lots of option contract interest today should help support. USDJPY: Lots of two-way business and hence volatility since the BOJ, and indeed the FOMC, but downside pressure prevailing with JPY unwinding on the crosses too. Lows of 148.50 this morning after failing at 151.20 post-FOMC then 150.25.

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