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  • Mike Paterson

All eyes on the US Fed

Wednesday 4 May 2022

The latest eagerly anticipated/second-guessed US Fed FOMC monetary policy decision comes today at 18.00 GMT with the presser at 18.30 GMT. Markets have priced in a 0.5% hike but also hawkish indications for further 50bp hikes in June, July, and September as well as the announcement and start of balance sheet reduction. With such hawkish expectations it's clear that price reaction risk is to the dovish side if they fail to deliver. As always we need to wait and see what's been actually priced in.

EU this morning saying they plan to phase out Russian oil and refined product imports within 6 months and the end of the year respectively. Suffice to say it still needs the approval of all 27 EU countries. FX pairs are seeing some good two-way business still ahead of the Fed understandably while Gold and oil have found some dip demand amid the general uncertainty while equities remain range-bound. More CB action tomorrow, or possible inaction compared to markets expectations, with the BOE at 11.00 GMT.

GBPUSD: A failure this time around 1.2570 has seen another retreat into 1.2470 and pips banked along the way from those re-sells around 1.2550 I mentioned here yesterday. I remain a rally seller overall while keeping an eye on EURGBP and GBPJPY as ever. BOE tomorrow casts a shadow. EURGBP: Ranging ever-tighter for the moment between 0.8400-30 as the two-way business continues. Expecting dip demand still but equally rally sellers poised as the uncertainty continues. GBPJPY: Support at 162.20-30 now keeping the pair underpinned but failing above 163.20 again. A coin flip still here but should see some further dip demand overall for the moment.

EURUSD: The 1.0480-00 bids still building but equally struggling to hold above 1.0550 again. USDJPY: Flatlining in the past 24 hours as markets wait on the FOMC, and USD vs JPY cross flows net out. Caution still required but I still like the cheeky rally-sell when momentum fades. EURJPY: Support at 136.70 then 136.50 still as the Euro still finds general dip demand as does USDJPY but 137.50 capping still amid the general EUR supply. USDCHF: A dip into 0.9720 yesterday but support prevailing again per recent trend and now testing 0.9800 once more amid generally firmer USD tones and with EURUSD finding some dip demand with the SNB never far away. EURCHF: A good hold of 1.0280 this time with the SNB lurking in the dips and that decent EURUSD 1.0480-00 demand but more rally sellers poised into 1.0330-60

AUDUSD: Holding 0.7080 in yesterday's retreat after the quick rush up to 0.7150 post-RBA but once again finding offers. GBPAUD failing at 1.7650 this time but holding 1.7530. NZDUSD holding 0.6420 in the latest retreat after capping above 0.6500. USDCAD: Capping around 1.2870 yesterday with that 1.2880 option interest in play and as oil firms while markets wait on FOMC. Two-way business still expected amid all the fickle market tones epxect knee-jerks later.

Let's continue to be careful out there in all things. Staying safe must be our main priority still.

Interbank rates: 08.35 BST

GBPUSD 1.2500

EURUSD 1.0525

EURGBP 0.8415

GBPEUR 1.1882

GBPJPY 162.72

GBPCAD 1.6040

GBPCHF 1.2268

GBPZAR 19.8395

GBPHKD 9.7375

USDJPY 130.11

EURJPY 137.00

EURCHF 1.0308

EURHKD 8.1965

AUDUSD 0.7107

USDCAD 1.2832

USDCHF 0.9795

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