The second-guessing games continue

Mike Paterson
May 12, 2023
2 min read

Friday 12 May 2023

The BOE yesterday duly hiked rates by 25bps as widely expected and with a neutral to cautious/slightly hawkish Monetary Policy Report re GDP revisions and it did produc a little GBP spike but overall the UK picture remains uncertain and we saw a retreat. This morning's GDP data was soggy overall with a 0.3% decline in March but +0.1$ for Q1 and the second guessing continues. Yesterday's US PPI confirmed the slightly softer CPI tones.

Equities are off yesterday's extended lows again this morning but WTI now capping into $71.50 after breaking down through yuesterday amid the ongoing global recession/slowdown fears.Those natural sellers of Gold sprevailing again as we break down through $2020 in the latest retreat to test $2000 this morning. Ukraine/Russia war continues to be the main geo-political elephant in the room with ongoing US/China/Taiwan tensions in the mix too The world remains a fragile place for sure.

GBPUSD: A cap at 1.2610 post-BOE and a solid retreat to test decent support at 1.2500 . Some GBPJPY better-risk demand helping to lift to 1.2540 this morning but I remain a rally seller as my preferred side. EURGBP: Capping around 0.8730 after yesterday's rally from 0.8670 post-BOE. Expect some two-way business still overall. GBPJPY: Capping around 169.50 yesterday and falling to 167.80 post-BOE but finding support as sentiment ticks up but capping again as I type.

EURUSD: Support around the key/psychological 1.0900 level in yesterday's extended retreat. Capping at the now pivotal 1.0930-40 this morning and some pips banked again in the retreat and I remain a rally seller as my preferred side overall. USDJPY: Good two-way business again amid the everchanging risk and USD sentiment with support continuing around 133.75-80 but equally a decent cap around 134.80-00. I still prefer to sell rallies/be long JPY but caution still required in these ever-fickle markets. Don't get greedy.

More detailed analysis across a variety of pairs available from mike@mspfx.co.uk.

Interbank rates: 08.40 BST

GBPUSD 1.2530

EURUSD 1.0927

EURGBP 0.8718

GBPEUR 1.1471

USDJPY 134.83

GBPJPY 169.00

GBPCAD 1.6890

GBPCHF 1.1170

GBPZAR 24.2210

GBPHKD 9.7610