Dovish BOE despite 75bps rate hike
Friday 4 November 2022
Following the 75bps rate hike and hawkish presser from the US Fed on Wednesday we got 75bps as widely expected and a dovish presser from BOe's Bailey and the Pound understandably came under further pressure per my warning here yesterday.Bailey said that rates will not be going up as high as markets have priced in and also drew attention with his comments that MPC expects UK recession to last into 2024. They also tellingly said they were yet to receive any clues re fiscal policy from the forthcoming Nov 17 UK Autumn Budget.....
NFP data today is now the immediate focus while the second-guessing continues from all the recent Central Bank hikes and noise. We've seen some good two-way USD tones in the past 24 hours but some supply in Asia with a degree of caution/profit-taking ahead of today's data and the weekend. Global equity markets and oil have have rallied off their post=FOMC lows with Gold also rising to $1650 after holding $1615. Geopolitical risk still very much in the mix too though.
GBPUSD: Another rally to test 1.1250 in Asia after holding 1.1150 a few times with the Pound generally finding some dip demand apart from the generally softer USD.I remain a rally seller overall. EURGBP: Underpinned at 0.8660 and a decent rally to 0.8743 amid the GBP sell-off post-BOE but capping and falling back to 0.8700 as I type. I expect the two-way business to continue.GBPJPY: A solid retreat amid the GBP supply but holding 165.00 and now trying to hold above 166.00 as I type amid some better risk but capped by core pair rally supply. I would still expect sellers to prevail for the time being as I've been warning.
EURUSD: 0.9800 capping so far after a decent hold of 0.9730 then 0.9750. Should see some good two-way business from these lower levels still amid the variable USD tones and CB conjecture. Cross flows, risk, Ukraine all in the frame still as well as flows and Fed.USDJPY: Trading 147.50-148.50 for the moment amid the USD and risk variables. Intervention threat still. I would expect rally sellers to prevail for the time being but dip demand expected still.EURJPY: Supported this time at 144.00 then 144.30 after retreat from 144.75 and sellers will remain poised. USDCHF: A dip into 1.0080 amid the USD suuply this morning after capping at 1.0150. Some EURCHF dip demand into 0.9860 and SNB never far away also both in the mix to lend support. EURCHF: Capping around 0.9880 as USDCHF sellers prevail but SNB will still be keeping an eye but rally sellers still poised.
AUDUSD: Forming a base around 0.6280 again and now up through 0.6350 on the softer USD tones and I remain a rally seller as my preferred side. NZDUSD also rallying amid the softer USD afer good hold of 0.5750 then 0.5800 and now posting 0.5825. USDCAD: Now breaking down through 1.3650 after capping at 1.3800 then 1.3750 amid the USD supply/firmer oil double whammy.
Have a good week-end everyone.