BOE and ECB in focus
Thursday 16 December 2021
Last night the US Federal Reserve announced their latest policy with taper speed doubled and a potential 3 rate hikes next year versus 2 previously while remaining cautious on COVID damage to the economy. Hawkish overall but not enough to deter equity markets from staging a solid rally and that has helped risk sentiment, underpinning JPY and CHF pairs amid some softer USD tones generally. Lots of option interest in play today and tomorrow per my email last night and laid out again below.
UK data this week has re-ignited speculation on the BOE raising interest rates today but the unknowns of COVID Omicron fall-out suggests they will stay on hold while signalling they remain ready to act next year if needed. In any case hike of 0.1-0.2% is not going to chase inflation away. As always keep an eye on the MPC vote count as well as the rhetoric. ECB expected to maintain their "inflation is transitory" tones while perhaps tinkering with QE/PEPP. Earlier this morning the SNB kept policy unchanged and maintained again they will intervene when needed to prevent CHF appreication. Norges Bank has just lifted rates by 0.25% as expected
GBPUSD: Basing at 1.3170 after its extended retreat through 1.3200 post-FOMC and now testing 1.3290-00. GBPUSD rally sellers, including me, ever poised while keeping one eye at least on the EURGBP and GBPJPY cross flows. BOE in focus too of course.Some large option interest tomorrow in play too. EURGBP: Holding 0.8490-00 but equally capping at 0.8530 (GBPEUR support 1.1725). Expect more 2-way business while we continue to range amid BOE and ECB announcements. GBPJPY: 151.00 now providing the support and now testing 151.80 on the better-risk rally so far but sellers remain poised.
I remain a GBP rally seller across the pairs overall as my preferred trading side albeit still against the grain currently so being patient as ever. These markets are ever-fickle so good/tight position management essential.
EURUSD: 1.1220 held after the initial FOMC-led retreat and now testing good resistance now at 1.1320. ECB in focus. USDJPY: Duly capping at 114.20-30 where I highlighted we have large option interest today and re-sells duly placed at 114.20 per my tweet.Underpinned at 113.80-00 now though amid the risk-on JPY supply.EURJPY: 128.60 support now but rallies capping into 129.20 as I type. USDCHF: Support now at 0.9220 again after failing above 0.9280 holding with the SNB ever vigilant and helped by some better risk sentiment and EURCHF back above 1.0450. EURCHF: Back above 1.0450 again with SNB shadow lurking still and helped by better risk tones but sellers poised still.
AUDUSD: 0.7135 resistance broken and now support line amid the generally firmer risk tones/AUDJPY demand as we test 0.7200. USDCAD: Capped at 1.2940 in the intial FOMC rally but now posting below 1.2800 as I type on the CADJPY demand and firmer oil prices.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 08.50 GMT