The happy-clappy gang prevailing again

Monday 22 January 2024

Equity markets are brushing off all the geopolitical risk and heading ever higher led again by tech stocks and helped by some softer US bond yields although they remain underpinned. Friday's Michigan University Sentiment data showed sentiment up, inflation expectation down and it was the latter that caught the markets' attention.

Currency pairs still in second-guessing mode and ranging albeit with a little USD supply returning. Meanwhile the Ukraine/Russia war and increasing Middle East Israel/Hamas/Houthi/Red Sea tensions still cast their own shadow and yet to reveal their full impact as markets remain myopic. The BOJ are unlikely to change policy tomorrow but guidance/rhetoric will key to future moves. Other CBs up the ramp this week too with the ECB, BOC, Norges, and SARB all in focus along with US core PCE and Q4 GDP which will feed into the Jan 31 FOMC second-guessing.

Equities roared higher with tech sector leading the charge helping S&P post record-highs and although off their highs still remain underpinned overall remarkably. WTI fell again but holding $72.50-60 so far this morning after capping at $73.80-00 with sellers poised still despite Red Sea concerns. Gold held $2015 but capping at $2030 again.

GBPUSD: Capping at 1.2725 after holding 1.2650 helped by some USD supply and where we had that large option interest rolling off on Friday. I remain poised for further sells when momentum fades but patience still required. EURGBP: Capping around 0.8590 again but holding 0.8570 in the retreats as the CB jury remains out. ECB on Thursday. GBPJPY: Underpinned still overall but capping this time into 188.40 after a hold of 187.50. We can expect rally sellers to remain poised amid all the uncertainty in these ever fickle markets but BOJ in focus too.

EURUSD: Support coming in at 1.0860 again and climbing back up to 1.0910 this time amid the USD supply. I remain a rally seller. ECB on Thursday. USDJPY: Finding support at 147.70 but capping at 148.50 amid BOJ tomorrow. I remain a rally seller as preferred side overall but caution/patience still required for the moment. Underpinned still but the higher we go the more the MOF/BOJ will be interested. A couple of banks telling me 149.00 could be a line in the sand.

For more detailed analysis across a larger number of FX pairs email mike@mspfx.co.uk

Interbank rates: 08.38 GMT

GBPUSD 1.2697

EURUSD 1.0890

EURGBP 0.8578

GBPEUR 1.1657

USDJPY 148.22

GBPJPY 188.19

GBPCAD 1.7050

GBPCHF 1.1022

GBPZAR 24.3460

GBPHKD 9.8855