Geopolitical risk to the fore again
Wednesday 16 November 2022
Fragile tones this morning amid claims that Russia have fired a missile into Poland which has understandably put the UKraine/Russia war back in the spotlight,The many emanating questions remain unanswered with equities, oil and gold still ranging relatively tightly but underpinned albeit with some signs of capping as I type. The Greenback came in for another slap yesterday after weaker than expected US PPI data.
Meanwhile in the UK the latest inflation data makes ugly reading with the highest headline CPI in 41 years but not exactly a surprise. Focus for the Pound this week remains on the Autumn Statement tomorrow and that continues to weigh on the Pound, helping to cap the post-data highs. Also on the agenda today, and very much in play we have BOE governor Bailey plus other MPC members testifying at 14.15 GMT to the parliamentary Treasury Select Committee newly chaired by Labour MP Harriet Baldwin.
US retail sales and export price data out today along with Canadian CPI and Fed heads Williams and Waller (the hawk who created some USD demand on Sunday/Monday). ECB's Lagarde in the mix too.
GBPUSD: A good hold of 1.1800 and sharp spike to 1.2030 post-PPI data then a retreat back to 1.1800 again. A further rally on the UK CPI data this morning but failure around 1.1900 with other considerations in mind (see above) with rally tempered by GBP supply on the crosses still. EURGBP: Underpinned at 0.8710 this time after retreating from 0.8800 amid some general GBP demand yesterday only to rally again this morning as GBP supply returns after the post-CPI kneejerk lower. BOE testimony awaited. GBPJPY: Holding 164.50 in yesterday's dips but equally capping aropund 166.25 with core pairs capping and some fragile risk tones. I would still expect two-way business as markets remain ever-fickle but with sellers to prevail.
EURUSD: A solid hold of 1.0300 again after the retreat from the 1.1480 US PPI knee-jerk highs and now back above 1.0400 as some USD supply returns. USDJPY: Capping at 140.30 this time after yesterday's post-PPI dip to 137.50 and hold of 138.75 with retreat to 139.40 as I type. EURJPY: Holding 143.50 then 144.50 this time but failing into 145.50 so far. USDCHF: Tightly bound still and capping around 0.9460-70 again as some USD supply returns but holding 0.9400 for the moment after yesterday's post-PPI kneekerk fall to 0.9355. Some support from EURCHF holding 0.9720-40 but sellers poised still. EURCHF: Support at 0.9720-40 area again with SNB watching but with sellers poised now into 0.9820-40
AUDUSD: Formed a base around 0.6700 yesterday but 0.6800 proving a step too far for the moment. NZDUSD supported at 0.6130 and a solid rally now to 0.6190 amid the softer USD tones. USDCAD: A decent hold of 1.3225 after the US PPI tumble but 1.3300 capping now amid USD supply and testing those lows again.
Interbank rates: 08.40 GMT