Fragile times prevailing still
Monday 5 September 2022
Softer risk sentiment to start the European session after Friday's wobble on the news that Russia was not re-opening the Nordsteeam 1 pipeline. Equity markets just off their lows as I type with fIrmer USD tones still prevailing overall. Gold still looking a little soggy but climbing back to $1716 from its recent $1685 lows while oil understandly is finding some support too. as markets continue to second-guess the Central Banks. OPEC+ meeting today to keep in mind.
Friday's rise in the US unemployment rate to 3.7% and softer 0.3% MoM average hourly earnings countered the hawkish tones from another strong 315k jobs reading but markets still expecting a 75bps hike from the Fed. Talking of CBs we have three up the ramp this week starting with the RBA tomorrow/tonight and expected to raise the cash rate by 50 bps to 2.35% while on Wednesday the BOC are expected to go the full 75 bps and then also a 75bps hike from the ECB on Thursday. us/Canadian markets closed today for Labour Day so we'll either get a little more volatility or a Monday malaise after the reent flurries of activity. The UK gets a new PM today chosen by just 0.3% of the electorate and widely expected to be Liz Truss who offers no credentials for leadership so the political uncertainty will continue and weigh on the already vulnerable Pound.
GBPUSD: Fresh lows of 1.1444 in the latest retreat this morning driven lower again by the stronger USD and UK recession fears. Some pips banked again per ongoing strategy and my tweet. Patience a virtue still but I continue to prefer the rally-sell side.EURGBP: Making its mind up at these higher levels ahead of Thursday's ECB decision and the ongoing gas supply issues.We've seen cap at 0.8675 and then 0.8625 hold in the retreat so far. Sellers poised again between 0.8650-80.
GBPJPY: Softer risk tones saw a test of 160.65 from 161.60 but rallying back strongly this morning and We can expect some fragile price action still.
EURUSD: Finally broken down through 0.9900 on the USD demand but a little bounce back to look at 0.9920 this morning. Rally sellers including me still poised.ECB, gas supplies still very much in play. USDJPY: USD demand helping to underpin at 140.00 now along with some GBPJPY demand this morning but capping around 140.50 atm. Good two-way business to be had I think still ableit admittedly with an upside bias but I can't go long up here and risk sentiment is still very fragile.EURJPY: A decent knock-back from 140.50 on Friday's softer risk/EUR reality check double whammy flow this time but support notable into 138.50. Expect more two-way business. USDCHF: Decent support still 0.9780-00 on the USD strength/EURUSD retreat but capping at 0.9840 so far as rally sellers remain poised with EURCHF capping too. SNB never far away in the extended dips. EURCHF: Finding good support at 0.9720 after capping at 0.9860 on Friday on a general EUR correction with sellers ever poised on inherent CHF demand too.
AUDUSD: Finding good support around 0.6780-85 still now after the cap at 0.6840-50 again and some pips gratefully banked again in the retreat in another rinse n repeat raid. GBPAUD rallying from 1.6875 as GBPUSD moves off its lows and currently testing 1.6950. NZD holding 0.6080 this time but looking a little soggy still after capping at 0.6140 as USD remains underpinned overall. GBPNZD holding around 1.8800 after a 1.9000 then 1.8900 cap as NZDUSD holds up better than GBPUSD. USDCAD: Capped at 1.3175 for the moment after a good hold of 1.3075 in Friday's post-NFP fun and games and as oil prices turned higher. Expecting some two-way business overall still amid the fickle variables but still looks underpinned overall for the moment.
A disappointing 1-2 loss for the mighty Shrimpers on Saturday but plenty of points still to play for and we go again. Looking forward to the 3rd Test vs SA starting on Thursday although likely to be weather affected to add to the uncertainty.
Let's continue to be careful out there.
Interbank rates: 08.44 BST