Monday 22 May 2023
On Friday US Fed Chairman Powell and former Chair Bernanke took part in a panel discussion which I highlighted in my update and we saw the Greenback take a knock with Powell suggesting that, due to a tightening in bank credit, the Fed may not need to hike rates as high as previously expected. There was more in his remarks to suggest a balance is nearing between tightening and pausing. Adding to the wobbly USD tones is the debt ceiling talks breaking down again after another failure to reach an agreement. June 1st now being given as the deadline with the prospect/scaremongering of the US defaulting on its debt becoming ever more a concern for markets but with McCarthy and Biden due to resume discussions today after some hints of optimism over the weekend in staff talks.
The G7 heads of state meeting produced new sanctions on Russia and concerns over China but nothing on currency. Today sees more CB speakers from the Fed and ECB. In China the PBOC left their benchmark interest rates on hold again.
Equities are off their Friday retreat lows and still underpinned overall with WTI also steady after its own retreat after capping at $73.50 to test $70.50-60 in early European trading. Gold had a return to test $1950-55 again in Friday's risk wobble but recovering through the $1970 area again amid some increasing tensions in the Ukraine/Russia war which continues to be the main geo-political elephant in the room and the world remains a fragile place for sure.
GBPUSD: Failure at 1.2480 on Friday after the USD sell-off but still ranging overall as we dip from 1.2460 in Asia to test 1.2420 this morning. GBPJPY risk-based flows very much in play. I remain a rally seller on core pairs as my preferred side. EURGBP: Holding 0.8670 again on Friday but equally failure at 0.8700 as core pair sentiment flutters around. Expect some two-way business still overall. GBPJPY: Basing around 171.20 again this morning after failure at 172.20-40 in the USDJPY tumble to 137.40 on Friday amid softer USD and risk tones. Rally sellers ever-poised but dip demand expected for the moment still.
EURUSD: Support into 1.0780 before Friday's USD-led rally but failure into 1.0830 time where we also have decent option interest today and testing 1.0800 again this morning. I remain a rally seller as my preferred side. USDJPY: Support prevailing at 137.40 in Friday's rapid retreat but capping at the pivotal 138.20-25 resistance before the latest retreat into 137.50. 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 from mike@mspfx.co.uk. Mentoring details there too.
Interbank rates: 08.34 BST
GBPUSD 1.2420
EURUSD 1.0800
EURGBP 0.8693
GBPEUR 1.1501
USDJPY 137.94
GBPJPY 171.32
GBPCAD 1.6780
GBPCHF 1.1141
GBPZAR 23.9620
GBPHKD 9.6830
USDCHF 0.8986
EURCHF 0.9705
EURHKD 8.4200
AUDUSD 0.6633
NZDUSD 0.6266
USDCAD 1.3504
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