Rate cuts still driving markets

Monday 4 December 2023

Lots going on still as we begin the final month of the year and markets are still firmly focussed on Central Bank rate cuts in 2024 as inflation eases. Fed Chair Powell's speech on Friday was a tad more hawkish/cautious than expected but that didn't deter traders and algos from their pre-determined path. US ISM data was soggy and that was enough to undermine the Greenback again. Gold has been a notable gainer but oil back on a losing streak.

Talking of CBs we have a few decisions coming our way before the Xmas festivities can truly begin. RBA tomorrow, BOC Wednesday, US Fed 13th, BOE, ECB and SNB 14th then BOJ wrapping things up on the 19th. The ongoing Middle East back-story sadly continues meanwhile and casts its own shadow over markets but still not driving prices. US NFP data lurking on Friday.

Equities fell in early NY but then rallied back strongly into the close again on the softer interest rate plays but lower in early European trading as I type. WTI capped at $76.50 and fell rapidly again as markets continued to express their disappointment/concerns at the OPEC+ outcome and now testing $73.00 as the retreat continues. Gold has been lively to say the least after breaking up through strong technical resistance area aobe $2050 that I've been warning about. All time highs of $2148 seen in a rush as stops were triggered and investors jumped further onto the lower interest rate scenario but we've since seen a retracement in Asia/early Europe back down to test $2060 start point. Heady times for gold traders and symptomatic of how fickle these markets are.

GBPUSD: Holding 1.2620 in Friday's retreat before rallying into the old 1.2720-30 resistance line amid the USD supply and EURGBP selling again but still tempered by some GBPJPY supply. I remain poised for rally sells when momentum fades but caution still required for the moment. EURGBP: Support at 0.8550-60 being tested amid the general EUR supply after capping at 0.8600 this time. Jury still out but CB rate divergence in play for the moment. GBPJPY: Capping at 187.50 yet again on Friday amid USDJPY extended retreat and variable risk tones but holding 185.50 this time amid some core pair support still. Sellers remain poised.

EURUSD: Support now around the old 1.0830 support line after capping at 1.0900 and retreating on the general EUR supply but still tempered by USD selling too. I remain a rally seller overall still. USDJPY: Capping at 148.35 in Friday's extended retreat amid the USD supply but holding 146.20 so far. I remain a rally seller as preferred side overall at these still elevated levels.

For more detailed analysis across a variety of pairs email mike@mspfx.co.uk

Interbank rates: 08.33 GMT

GBPUSD 1.2668

EURUSD 1.0870

EURGBP 0.8580

GBPEUR 1.1653

USDJPY 146.93

GBPJPY 186.15

GBPCAD 1.7117

GBPCHF 1.1067

GBPZAR 23.6596

GBPHKD 9.8698