Wednesday 3 January 2024
The last 24 hours has brought a mixed bag with US bond yields retreating off their highs bringing some USD supply but better risk tones overall all within a landscape that, highlighted by the FOMC Minutes, sees markets having another think about the extent of rate cuts this year with inflation concerns growing again.
French and German CPI data this morning certainly support that view as we wait on the key US NFP jobs/wages data tomorrow. Meanwhile the Ukraine/Russia war and the Red Sea disruptions/fallout continue to accelerate while the ongoing Middle East Israel/Hamas back-story casts its own shadow over markets and traders are still second-guessing the rate/extent of CB interest rate cuts in the months ahead too.
Equities rallied then fell again but finding some dip demand again this morning with the jury still out on the speed of cuts by FOMC et al. WTI is finding some support amid the generally better risk tones and Red Sea concerns and now testing $74.00 after holding $671.50 but sellers will remain poised. Gold fell into $20230 yesterday amid the better risk tones but still underpinned and testing $2050 as I type.
GBPUSD: Capping above 1.2700 this morning after holding 1.2600 again in yesterday's retreat amid the USD supply. I remain poised for further rally sells when momentum fades but caution still required as we range tightly. EURGBP: Capping at 0.8640 yesterday amid some GBP demand returning helped by better risk GBPJPY demand but holding 0.8615 this morning and now 0.8630 as the CB jury remains out. GBPJPY: Better risk tones and dip demand on core pairs forming a base at 180.00 then 181.00 and now back up to 182.50. We can expect rally sellers to remain poised amid all the uncertainty but underpinned again for the moment in these ever fickle markets.
EURUSD: Support at 1.0890 yesterday. Now up through 1.0950 helped by the USD supply and firmer EU inflation data but the jury out still amid all the CB conjecture and cross flows. I remain a rally seller overall. USDJPY: Finding support at 142.50 yesterday and finding some decent demand amid the better risk JPY supply and Japan returning from hols amid the earthquake tragedy.Conjecture remains on BOJ normalization but seemingly hopes fading again for the moment.I remain a rally seller as preferred side overall and remain poised when momentum fades but caution required for the moment.
For more detailed analysis across a variety of pairs email mike@mspfx.co.uk
Interbank rates: 08.40 GMT
GBPUSD 1.2700
EURUSD 1.0948
EURGBP 0.8620
GBPEUR 1.1600
USDJPY 143.46
GBPJPY 182.22
GBPCAD 1.6916
GBPCHF 1.0803
GBPZAR 23.6850
GBPHKD 9.8855
USDCHF 0.8502
EURCHF 0.9310
EURHKD 8.5218
AUDUSD 0.6750
NZDUSD 0.6270
USDCAD 1.3322
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