Wednesday 17 June 2020
It's still a tale of two halves out there as the appetite for risk turns up and down, and now up again a little as I type, amid all the global fragility and markets awash with liquidity.
Some good news on COVID-19 treatments but Beijing starting to lock down again and that has to be a worry. Meanwhile Powell came out and said there's a probability more support will be needed but that they didn't need to buy the full corporate bond allocation. Both keeping risk sentiment on the back foot overall. Softer UK inflation this morning was only to be expected.
GBPUSD yesterday failed around 1.2680 again but held 1.2620 before finally breaking lower to post 1.2541 amid the softer risk plays and EURGBP once again finding dip demand plus another knock on the inflation data Tthis morning. EURGBP continued its retreat as GBPUSD initially found a bid and had a look below 0.8920 (GBPEUR up to 1.1174) before rallying again to test 0.8990 (1.1122) this morning as GBP found sellers again generally.GBPJPY peaked again above 136.00 but finding support at 134.40 to now bounce up through 135.00 on the slightly better risk appetite in early European trading.
I stay poised to sell GBP rallies overall and buy back in the dips as ever but patience continues to be a virtue and entry level key as always. I still expect to see some dip demand though given the recent rallies.
USDJPY failed above 107.60 again but demand/support duly found around 107.20-25 again where we have large option expiries today. Rinse n repeat still. EURJPY failed above 121.85 but finding support/demand around 120.50 on the retreat and now back up through 121.00. EURUSD found itself capping around 1.1350 again and has made its own retreat on the softer risk/firmer USD to post 1.1230 but now seems to have a line of support forming between 1.1250-60 where we have some expiries but not a significant amount so more to do with cross-pair flows with EURJPY, EURCHF and EURCHF all with dip demand. USDCHF broke lower to test 0.9460 as EURCHF retreated but currently holding 0.9480 again on the slightly better with the SNB seemingly drawing another line under it.
AUDUSD had its own retreat amid the softer risk to test 0.6830 and some pips duly banked but another strong rally to post 0.6920 since and seems underpinned still. USDCAD burst up through 1.3600 on some softer oil/CADJPY selling but a decent retreat since on firmer oil and lightly better risk this morning.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 08.45 BST