ECB in focus
Thursday 29 October 2020
Risk sentiment remains fragile with the usual suspects in play but today's attention turns to the eagerly awaited ECB announcement at 12.45 GMT and the all important press conference at 13.30 GMT.
Dovish tones expected and largely factored in but, as always, it's a question of rumour/ecpectation versus fact. Not too long until we find out and then the second-guessing will start all over again. I'll try and send something out prior with a few frther thoughts If I get chance.
Equities and oil are on the back foot still after some serious tumbles yesterday around the globe but FX markets have for the most part been quite resilient.
Yesterday the BOC held interest rates at 0.25% as expected and said they're "recalibrating the QE programme to shift purchases towards longer-term bonds, which have more direct influence on the borrowing rates that are most important for households and businesses". We saw some CAD selling but that was as much on the softer oil/risk than anything the BOC offered up. The BOJ have left rates on hold this morning as expected with the usual blather about adding to monetary easing if needed, blah blah, blah. JPY suitably unmoved.
Month-end flowa still showing moderate need to sell USD with the currencies to benefit most being EUR and GBP and we saw some of that again yesteday on both pairs into the 4pm London fix as I warned.
GBPUSD had a lively day with some positive Brexit reports about a deal by "early November" giving the pair a sharp lift from 1.2950 to test 1.3020 having once again found a base below 1.2920 that we also saw a week ago. 1.2970 has held on the subsequent retreats but sellers poised around 1.3025 still. EURGBP had its own roller coast ride too around the Brexit headlines but held 0.9010-15 yet again helped by the usual month-end demand but failing above 0.9060 on the bounce with large expories in play at 0.9050 today and more at 0.9110. I remain a dip buyer overall especially with the usual month-end demand in play but respecting the current two-way business, options and ECB today of course.
No change in my basic view and I stay poised to sell GBP rallies as my preferred side and buy back in the dips as ever. Patience continues to be a virtue and entry level key as always. I still see dip demand though with markets and risk sentiment still in a state of uncertainty overall.Brexit remains the very big elephant in the room.
USDJPY remains on the back foot as JPY risk-off demand continues. As per my update yesterday sellers capping rallies at 104.50. Good option-related demand at 104.00 today.EURJPY found a lower cap into 123.00 this time amid the softer risk having bounced back up through the key 122.50 area but lower again now at 122.33 as I type.
EURUSD has also had another retreat amid the softer risk tones and general EUR supply still after yesterday's rally back up to 1.1760 with markets expecting a dovish ECB. I remain a rally seller overall but let's see what the ECB delivers, or doesn't as the case may be.
USDCHF has based at 0.9080 this time as EURUSD retreats and now back up through 0.9110 with EURCHF finding bids at 1.0680 and SNB casting its shadow still as we wait on the ECB.
AUDUSD has retreated again from that decent sell interest around 0.7150 and broken down through 0.7100 to post lows of 0.7039 with AUDJPY supply evident again. USDCAD remains underpinned amid the softer risk/oil tones and dovish BOC and now testing 1.3320 again as I type helped by CADJPY supply again after holding 1.3280.
Markets are ever-fickle so don't forget to contact me if there's areas that you might need some further help with.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 07.58 GMT