Monday 5 August 2024
A heady combination of softer NFP data on Friday bringing greater concerns over the US economy plus rising tensions in the Middle East have brought further falls in US bond yields and a large retreat in equities and commodities amidst the increased risk-off sentiment.
Large Yen and CHF demand notable again in Asia with USDJPY selling leading the way down to 141.50 after some decent two-way business albeit with a softer USD bias on Friday. The safe-haven plays have capped other core pairs and commodity currencies have been driven lower although core and cross pairs off their lows and rising as I type. The MOF/BOJ always talks about not wanting excessive JPY moves but don't expect them to step in on the other side any time soon although the cost of stronger Yen to exporters will be a real cause for concern.
It's taken a while for markets to fully wake up to the global turmoil that I've been highlighting for a long time choosing instead for a more myopic assessment. Now they're playing catch up, and some, with core positions being liquidated adding to the volatility. Today's data slate brings final EZ and UK PMIs then US ISM Services. Fed's Goolsbee and Daly speaking too.
Equity markets globally have tumbled amid the risk-off sentiment, notably the Nikkei falling over 12%, with the recent and latest declines triggering further stops. WTI has found itself in retreat with the fear of global economic slowdown outweighing the Middle East escalation supply issues. Support coming in at $72.00 after the risk-off retreat from $76.00 then $74.00 this time. Gold has found some dip demand into $2410 this time amid the fragile risk tones but with rallies capped by more profit-taking between $2460-70 still. Dip demand should remain but profit-takers/sellers still poised.
GBPUSD: Capping again at 1.2840 on Friday post-NFPs by the risk-off GBPJPY and GBPCHF selling to drag down toward 1.2700-10 where we based previously. The fall also helped by EURGBP breaking up further through 0.8500 resistance to post 0.8580 earlier. I prefer rally-sell side still overall but patience as ever a virtue. EURGBP: Holding 0.8480 and breaking up through 0.8500 helped by the GBP selling elsewhere and currently still underpinned having posted 0.8580. ECB/BOE rate cut conjecture contines but these moves are all about risk flows. GBPJPY: Another rollercoaster ride unsurprisingly amid the fragile risk tones with hedge funds once again a main driver. Capping at 190.00 on Friday and a retreat into 181.00 before bouncing to 183.75 as I type. Sellers will remain poised but dip buyers still hoping for some value down here.
EURUSD: Climbing back up through 1.0850 then 1.0900 amid the USD supply post-NFP but rallies tempered by the safe-haven JPY and CHF demand on the crosses. Highs of 1.0965 so far after holding 1.0900 in the in initial retreat from 1.0900. USDJPY: The collapse in Asian trading to test 141.50-60 is the headline move but lots of two-way business and hence volatility again amid the USD and risk variables after failing at 147.00 on Friday. Capping at 144.00 in this morning's bounce so far.
Traders - For more detailed analysis across a larger number of FX pairs including market order flows and options expiries email mike@mspfx.co.uk
Interbank rates: 07.50 BST
GBPUSD 1.2748
EURUSD 1.0906
EURGBP 0.8554
GBPEUR 1.1687
USDJPY 143.00
GBPJPY 182.33
GBPCHF 1.0900
GBPZAR 23.6498
GBPHKD 9.9634
USDCHF 0.8510
EURCHF 0.9281
EURHKD 8.5157
AUDUSD 0.6400
NZDUSD 0.5896
USDCAD 1.3890
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