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  • Mike Paterson

Euro dips as ECB disappoints the hawks

Friday 10 June 2022

The ECB yesterday duly announced the end of its net asset purchases and confirmed that policy rate lift-off will start in July but only by 0.25%. Lagarde’s presser didn't rule out 0.5% in September, nor have some ECB comments since but markets had priced in more hawkish tones overall so my comment that " risk could be to the downside" indeed played out and we saw EUR retreat across the board.

Some JPY selling notable too overnight amid intervention talk again from Japan and with equities lower this morning. Gold and oil prices off their highs too. Variable/fragile risk sentiment overall still with Ukraine and inflation remaining the very different elephants in the room. US CPI data out at 12.30 GMT to maybe set the algos off.

As ever, deal on fact not second-guessing. 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: Found support from the EURGBP retreat but another cap above 1.2550 yesterday but equally holding 1.2480 area again as we continue to range amid the variable USD tones and cross flows. Pips banked in the retreat again after some re-sells placed in the rally. I remain poised to sell rallies but timing as ever is crucial. BOE meeting on 16th. EURGBP: Rallying back to test 0.8525 this morning after holding 0.8480-85 yesterday post-ECB but sellers prevailing again as I type and helping to support GBPUSD again. I expect rally sellers to prevail for the moment but not looking for big retreats. Much will depend on what the BOE do/say next week now we know what the ECB position probably is. GBPJPY: Capping into 168.75 again and another decent retreat to look at 166.60 as USDJPY capped out again at 134.50 and risk sentiment turned softer. Dip demand still expected until Japan intervene on JPY weakness or risk sentiment really turns lower.

EURUSD: Failure into 1.0780 yesterday post-ECB and now testing 1.0600 amid the general EUR supply. USDJPY: Another cap around 134.50 amid more chatter from Japan and softer-risk JPY supply. Current trend still seems underpinned and holding 133.35 this time. EURJPY: A cap at 144.00 and then 143.00 amid the EUR supply/JPY demand double whammy and now testing decent demand into 142.00. USDCHF: EURCHF supply returning post-ECB and helping to cap this pair at 0.9820 along with softer-risk CHF demand. SNB ever lurking in the dips still and their latest meeting next week very much in focus. EURCHF: Capped above 1.0500 post-ECB and a solid retreat to now test 1.0380 amid the general EUR supply and CHF demand double whammy. SNB meeting next week very much in focus.

AUDUSD: Finding a cap into 0.7175 this time with AUDJPY selling notable again but holding 0.7080 so far. GBPAUD capping at 1.7625 in latest rally and falling back to 1.7500 as AUDUSD dip demand outstrips GBPUSD. NZDUSD tested 0.6375 after that failure above 0.6460 but finding some decent dip demand this morning. GBPNZD finding support at 1.9400 this time after the 1.9600 cap with more bids into 1.9350. USDCAD: Supported at 1.2550 again helped by the CADJPY selling and now posting 1.2700 in a solid rally as oil price caps and USD demand returns.

Let's continue to be careful out there and have a great week-end.

Interbank rates: 08.50 BST

GBPUSD 1.2480

EURUSD 1.0627

EURGBP 0.8517

GBPEUR 1.1741

GBPJPY 166.69

GBPCAD 1.5860

GBPCHF 1.2220

GBPZAR 19.3656

GBPHKD 9.7219

USDJPY 133.60

EURJPY 142.00

EURCHF 1.0392

EURHKD 8.2811

AUDUSD 0.7128

USDCAD 1.2700

USDCHF 0.9782

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