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  • Writer's pictureMike Paterson

Pound feeling some rate hike love again

Tuesday 17 May 2022

Another fickle 24 hours of variable risk but some firmer tones this morning with equities and oil on the rise again as is gold albeit after capping into 1830 this time after yesterday's hold of 1785.

Yesterday also saw another inept performance from BOE Governor Bailey & Co in their testimony to UK lawmakers on the latest Mon Pol report but the lack of any real surprises saw traders and algos feel more comfortable buying a few Pounds again. That underpinning has been further accelerated this morning by the higher than expected jobs and wages report which has markets jumping around on rate hike talk hot coals again. I still say the 1.25 milliom job vacancies are a hinderance to economic growth and not a help by generating extra disposable income due to higher wages in theory. Yes today's data saw increased average wage growth but inflation continues to oustrip and I also remain concerned by the many companies struggling to realise their full potential due to lack of suitable labour force/wage demands.

More central bank risk/hot air today as US Fed Reserve Powell speaks on inflation at 18.00 GMT. Mester follows at 18.30 GMT then Evans at 22.45 GMT.

Anyhow, for new and older subscribers alike I repeat my view that it's still a case of not over-analysing but keeping your focus on price action in core and cross-pairs.Continue to identify ranges and what levels present value for money. Algos will continue to knee-jerk price action on the variable headlines versus natural flows. Discipline is key as ever.

GBPUSD: Holding 1.2230 yesterday amid the BOE testimony helped by some EURGBP selling and finally breaking up through 1.2300 then 1.2350 post-UK data this morning and rallying strongly triggering a few stops along the way to break 1.2450 as I type. I remain poised to sell rallies but happy to sit back and watch this for the moment.EURGBP: Another solid retreat initially amid some wobbly risk and then the GBP grabbing which now sees a test of 0.8400.I still expect some dip demand albeit rally sellers still poised too. Take your pick ! Some option interest nearby. GBPJPY: Up up and away to 161.50 after holding 158.00 as core pairs find dip demand again amid better risk tones and UK rate hike hype.

EURUSD: A solid hold of 1.0400 yesterday and now at 1.0450 to test 1.0480 courtesy of better risk tone EURJPY demand but tempered by the EURGBP supply. USDJPY: 128.80 now providing support helped by firmer risk sentiment but with sellers at 129.50-60 still helping to cap.EURJPY: Support/bids now coming in at 134.75-80 and testing 135.60 amid the better risk. Sellers will remain poised though amid the uncertain risk and ECB scenarios. USDCHF: Support at 1.0000 history amid the generally softer USD tones and a test of 0.9960 currently with EURCHF seeing two-way business again. SNB will still be not be far away.EURCHF: 1.0425-30 support now with the SNB keeping an eye on it all but sellers still poised 1.0480-00

AUDUSD: Holding 0.6920-50 in the latest retreats and now testing 0.7030 amid some AUDJPY demand returning again and generally softer USD tones. GBPAUD holding 1.7600 with 1.7800 still looking to cap. NZDUSD supported around 0.6300 now where we also have large option interest today. GBPNZD still holding around support into 1.9500. Sellers 1.9600-30. Bids 1.9530-50, 1.9480-00. USDCAD: A further retreat into 1.2800 on better risk tone CADJPY demand/firmer oil and softer USD triple whammy.Expecting demand into 1.2750-80.

Let's continue to be careful out there.

Interbank rates: 08.36 BST

GBPUSD 1.2430

EURUSD 1.0458

EURGBP 0.8421

GBPEUR 1.1880

GBPJPY 160.51

GBPCAD 1.5967

GBPCHF 1.2418

GBPZAR 20.0014

GBPHKD 9.6986

USDJPY 129.36

EURJPY 135.31

EURCHF 1.0447

EURHKD 8.1637

AUDUSD 0.7007

USDCAD 1.2825

USDCHF 0.9990

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