Tuesday 15 August 2023
Greenback grabbing continues as Chinese economy causes concern still
Some better risk sentiment in the past 24 hours but a few wobbly tones returning this morning as European trading gets underway. The Russian central bank has hiked rates by 350bps to 12% in a hastily called emergency meeting after the Rouble weakened beyond 100 vs USD. The Chinese central bank has, on the other hand, trimmed the MLF rate by 0.15% and reverse repo rate to 1.80% from 1.9% amid ongoing conerns of weakening economic activity confirmed later by softer industrial output and retail sales data.
We've seen further USD demand amid rising 10-year bond yields which has seen some fresh recent highs across a number of pairs not least of which USDJPY which has pushed on to post 145.87 and remains underpinned even though some JPY demand returning this morning helping to cap along with the expected verbal intervention shots across the bows from BOJ/MOF. UK jobs/wages data this morning has seen weaker employment numbers but strongest annual wage growth since these current records began in 2001 as workers demand greater protection versus inflation and employers struggle to recruit. US data later features Retail Sales and Empire State Manufacturing Index at 12.30 GMT.
Equities are in rapid retreat amid renewed fears this morning after yesterday's rally in these ever-fickle marketss while WTI has found a base this time at $81.25 but capping at the lower $82.60 as the second-guessing continues. Gold currently finding support into $1900 this time after cap around $1915 as the jury remains out and tight ranges prevail. Geopolitical concerns still very much a threat to market stability with focus on Ukraine/Russia but also tension in the Middle East among other areas of conflict.
GBPUSD: Capping at 1.2720 after holding 1.2615 yesterday in the extended retreat.Some re-sells duly placed in the rally and I remain bearish on the UK and GBP overall. Large EURGBP options in play today. EURGBP: Finding a cap at 0.8620-30 this time but holding the pivotal 0.8560-85 with large option contract interest today at 0.8600 helping to contain. More two-way expected as core pairs make their mind up. GBPJPY: A good hold of 183.50 again yesterday and strong rally to 185.30 amid the better risk tones and USDJPY rally but sellers still lurking amid the fragile risk tones overall.
EURUSD: Holding decent support/bids at 1.0875-80 yesterday in the USD demand-led retreat then 1.0900 since but capping at 1.0930 with large option interest helping to contain.I prefer the rally-sell side still. USDJPY: Now underpinned at 145.25 but sellers prevailing at 145.85 for the moment helped by some risk-off JPY demand again and BOJ/MOF intervention fears. I remain a rally seller as preferred side overall but with patience a virtue as ever. Equally dip buyers finding results too of course amid the USD demand. EURJPY: Support at 158.50 now amid core pair dip demand but sellers lurking at 159.25-30 so far. Underpinned overall still but some two-way business expected amid mixed risk tones and core pair flucation
USDCHF: Support at 0.8750-60 yesterday then the USD demand-led break up through 0.8770-80 resistance to test 0.8820-30 only to fall back from whence it came. Good jobbing pips to be had still and I remain a rally seller overall.
EURCHF: Rally sellers prevailing 0.9610 but support 0.9570-80 still as we continue to range tightly amid core pair and risk flucations.
AUDUSD: Support around 0.6460 again this morning in the retreat from 0.6520-25 again amid firmer USD/softer commodity ccy/risk tones and Chinese wobbles. I remain a rally seller overall.
GBPAUD: Underpinned around 1.9500 again as AUDUSD retreat outstrips GBPUSD but still tightly bound as core pairs fluctate.
NZDUSD: Similar back story to AUDUSD yet again with support around 0.5950 still after capping into 0.6000 this time.
GBPNZD: Also underpinned still, this time at 2.1180-00
USDCAD: Support coming in at 1.3440 this time Friday amid the retreating oil price/firmer USD double whammy but capping into 1.3500. Expect more two-way business as I've been warning amid the oil, USD and risk variables.
Let's continue to be careful out there.
Interbank rates: 08.43 BST