Markets in a whirl still
Friday 14 October 2022
Yesterday's US CPI data came in above expectations and once again any talk of inflation peaking seemed somewhat premature. Markets still pricing in at least a 75bps rate hike on 2 November but the picture in USD/equity/bond markets has been anything but clear in the aftermath. Yes we saw some Greenback grabbing initially but that move was reversed, notably a sharp drop in USDJPY prompting MOF intervention talk. Equities fell but hit technical support along with the WSJ (recent Fed source) article saying a 100bps hike not in a frame.
Meanwhile conjecture remains over the UK government and its reported plans to u-turn on much of its recent fiscal reforms.The Pound and gilt markets have certainly found support on the rumours but is it a case of buy rumour/sell fact? Fin Min Kwarteng left the G7 meeting early and is on his way home (but for what purpose exactly? Resignations?) while the PM and her cohorts discuss changes. Today is last day specified by the BOE for their gilt market assistance...
Whatever your view/take/analysis one thing is clear, we are experiencing global markets in panic/confused/second-guessing mode the like of which we haven't seen for many a year, indeed decade.
GBPUSD: More two-way business in the past 24 hours with the pair still resilient albeit in retreat again this morning. Cross flows still having a big impact too. EURGBP: A steady fall to 0.8615 amid the GBP demand but a decent hold down there albeit now with sellers poised 0.8680-00 capping. I expect more two-way business to continue with the Eurozone facing issues of its own. GBPJPY: A good bounce from 165.00 this time amid the GBP and USDJPY rebound But capping around 167.00 so far. USDJPY still vulnerable to BOJ intervention/USD sentiment turnaround but underpinned into 147.00-30 now.
EURUSD: A good hold of 0.9700 in yesterday's strange rally but capping around 0.9800 as the USD demand returns. Cross flows, risk, Ukraine and ECB conjecture all in the frame still as well as USD flows. USDJPY: Holding above 147.30 now as the grind higher continues amid the general USD demand after its sharp drop to 146.40 post-CPI data. EURJPY: Support now at 143.75 but capping into 144.50 as EURUSD retreats. USDCHF: Rally above 1.0060 but since back down to test 0.9960 before finding demand again this morning as EURUSD retreats. EURCHF: CHF demand and EURUSD retreat helping to cap above 0.9780 but holding 0.9730-40 with SNB casting its shadow overall.
AUDUSD: Support now into 0.6300 after failure above 0.6340.I remain a rally seller as my preferred side. NZDUSD failing at 0.5680 and testing 0.5650 in latest retreat. USDCAD: A sharpy fall from 1.3960 after the CPI-led spike with retreat aided by oil price recovery. Holding 1.3700 and I expect two-way business overall still amid the fickle oil and risk variables.
Let's continue to be careful out there.
Interbank rates: 07.58 BST