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  • Writer's pictureMike Paterson

US CPI in focus

Wednesday 13 July 2022

No prizes for guessing where markets have their focus today with the latest US inflation data release at 12.30 GMT. Equity markets ranging still meanwhile with softer Gold and Oil tones too still albeit off their lows while the Greenback continues to dominate the landscape overall.Some JPY demand returning yet again this morning as risk softens again a little and helping to cap cross and core pairs again. Eyes on EURUSD again which is threatening to finally break parity after yesterday's relief rally to 1.10070 after the intial holds.

The RBNZ hiked rates by 0.5% as expected and stands by its May forecasts.The Committee agreed it remains appropriate to continue to tighten monetary conditions. Today sees Bank of Canada decision at 14:00 GMT. Market expects a 75bp hike to 2.25%, with policy guidance in the statement continuing to indicate the need for still-higher policy rates. Inflation forecasts in the quarterly Monetary Policy Reports have been consistently revised up over the last year and are likely to be substantially higher again in July, while growth forecasts will likely be revised lower but still at solid levels.

UK GDP came in better than expected but still some underlying concerns amid political uncertainty continuing to provide a GBP backstory that will continue until Sept 5 when the new PM is announced. First ballot today which will trim the list down from the current 8 runners.

As always, don't over-analyse but be ready with your preferred levels/strategy, place orders and let the algos do the heavy work. Discipline is key as always but equally hesitation can often ruin a great idea.

GBPUSD: Capping into 1.1940 post GDP data helped by some GBPJPY supply returning. Rally re-sells duly placed once more as we continue to range. I remain poised to sell rallies. Timing as ever is crucial. Large option interest at 1.2035 should the rally gods prevail though. EURGBP: A cap now at 0.8440 as the Euro pressure continues overall but holding 0.8400 as jury remains out after the extended retreat. I still think we'll see two-way pips overall.GBPJPY: Capping at 163.60 post UK GDP but holding 163.00 so far as the jury remains out amid variable risk tones which will help provide good two-way pips still for the moment.

EURUSD: Capped at 1.0070 after yesterday's parity hold and 1.0055 since and we've held again this morning. Barrier option interest intact and will still help defend further attempts with tech support behind at 0.9980. Ukraine, Russian gas supplies, ECB, recession remain the focus.USDJPY: A good hold of 136.50 yesterday in the retreat and now 137.00 so far with sellers capping at the old 137.25 support line as we also see some JPY demand return.EURJPY: Support at 137.25 again after a failure at 138.00 as EURUSD holds 1.0000 again.USDCHF: Support at 0.9800-20 now history amid softer USD and risk tones as EURUSD holds 1.0000 but EURCHF still retreating and tempering gains. Jury remains out on SNB and amid variable risk but CHF still in demand as further tightening expected.

EURCHF: Capping around 0.9860 and another retreat to look at 0.9800 amid the softer risk and EUR supply double-whammy. Some SNB support still I reckon but sellers will remain poised as I've been warning.

AUDUSD: Capping at 0.6780 this time after finding a decent base at 0.6740. GBPAUD currently testing 1.7550 again after failing at 1.7650 as AUDUSD rally outstrips GBPUSD this time. NZDUSD capping into 0.6150 post-RBNZ hike but holding 0.6120 in retreats so far. GBPNZD bids into 1.9350 still after capping into 1.9475 this time. USDCAD: Yesterdays drop in oil price and general USD demand helping to support and now a base between 1.2980-00 but failing at 1.3030 with oil price off its lows. Large 1.3000 option interest today helping to contain.

Let's continue to be careful out there.

Interbank rates: 08.42 BST

GBPUSD 1.1900

EURUSD 1.0016

EURGBP 0.8417

GBPEUR 1.1880

GBPJPY 163.14

GBPCAD 1.5495

GBPCHF 1.1626

GBPZAR 20.2077

GBPHKD 9.2700

USDJPY 137.09

EURJPY 137.32

EURCHF 0.9814

EURHKD 7.8031

AUDUSD 0.6771

USDCAD 1.3021

USDCHF 0.9797

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