Second guessing continues

Monday 8 January 2024

Friday's key US NFP jobs/wages data headlines came in stronger than expected (but some softer undertones) and then US ISM added to the doubt and reversed the bullish USD moves with a soggy report that leaves markets still second-guessing future moves from the US Federal Reserve and indeed other CBs. US bond sellers prevailed and risk sentiment has wobbled again

Meanwhile the Ukraine/Russia war and the Red Sea disruptions/fallout continue to accelerate while the ongoing Middle East Israel/Hamas back-story casts its own shadow over markets and yet, imnho, to reveal its full impact. Data wise attention turns to US CPI on Thursday.

Equities fell then rallied then fell again in NY amid the data confusion and have fallen again in Asia/early European on the back of soggy Chinese backstory but with the jury still out on the speed of cuts by FOMC et al. WTI is finding some support at $72.50 this time amid the Red Sea concerns after capping above $74.00 with sellers poised still. Gold ranging tightly $2030-50 for the moment as the jury remains out.

GBPUSD: Capping at 1.2775 in Friday's rally after another hold of 1.2600 in the US data fallout. I remain poised for further rally sells when momentum fades but patience still required. EURGBP: Capping at 0.8635 amid the GBPUSD rally outstripping EURUSD but holding 0.8600-05 agin as the CB jury remains out. GBPJPY: Softer risk tones overall saw the pair capping above 184.00 again and now challenging 183.00-20. We can expect rally sellers to remain poised amid all the uncertainty in these ever fickle markets.

EURUSD: Support coming in at 1.0880-00 in Friday's fun n games but capping at 1.1000 with some speculation the ECB under further pressure to cut sooner rather than later and now back testing 1.0920-30 support area as I type. I remain a rally seller. USDJPY: Finding support around 144.00 again after capping at 146.00 on Friday. A few pips initially paid away on re-sells between 145.00-60 per ongoing strategy/convictions but got lucky with the ISM-led rapid reversal and pips gratefully banked. Conjecture remains on BOJ normalization but seemingly hopes fading again for the moment.I remain a rally seller as preferred side overall and remain poised when momentum fades but caution still required for the moment.

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

Interbank rates: 08.47 GMT

GBPUSD    1.2683

EURUSD    1.0930

EURGBP    0.8617

GBPEUR    1.1604

USDJPY    144.50

GBPJPY    183.28

GBPCAD    1.6965

GBPCHF    1.0795

GBPZAR    23.7307

GBPHKD    9.8772

USDCHF    0.8513

EURCHF    0.9304

EURHKD    8.5152

NZDUSD    0.6231

USDCAD    1.3383