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  • Writer's pictureMike Paterson

Pound rallies as inflation falls

Wednesday 22 May 2024

Yes folks, UK inflation rate is still coming down according to this morning's data but the market was expecting a further decline than we actually got and we've therefore seen a move higher in the Pound as a June rate cut from the BOE gets pushed back to August. I don't see extended gains on this morning's move but given the markets' myopic focus on Central Banks and interest rate cuts the latest data should provide some GBP underpinning.

Earlier today the RBNZ left rates on hold but with more hawkish tones than expected in the rhetoric and we've seen NZD rally but equally retreat back from whence it came as the jury remains out. FOMC Minutes on the slate later today following yesterday's raft of Fed speakers that offered little of new interest. Ukraine/Russia war and Middle East tensions sadly still cast their own very large shadow too.

Equities remain underpinned but with profit-takers still lurking as the CB second-guessing continues. WTI has held $77.30 this morning after capping at $78.80-00 amid the ongoing variables. Gold has held $2400-10 this morning after capping at $2435 with some understandable profit in the rallies but appetite for the shiny stuff remains.

GBPUSD: Holding 1.2680-00 yesterday amid some general USD supply and a rapid rally to 1.2750 this morning post- inflation data but capping at 1.2760. EURGBP: Capping around 0.8550 but holding 0.8510-15 this morning post-CPI retreat as the ECB/BOE rate cut conjecture and cross flows continue. GBPJPY: Holding 198.20-30 then 198.60 pre- UK CPI before the rapid rally to 199.50 before capping.

EURUSD: Capping at 1.0875 but holding 1.0840 as we continue to range tightly. USDJPY: Support coming in at 155.80 and now bids around 156.10-20 amid the better-risk JPY supply.

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