Markets in mayhem as another week closes
Friday 23 September 2022
Yesterday the SNB hiked rates by 75bps rather than the full 100bps many were expecting given their recent rhetoric. Thrown in a renewed commitment to FX intervention (both sides for good measure) and we saw the Franc tumble. Meanwhile USDJPY continued to keep traders guessing after the reported BOJ intervention.
Then came the BOE decision to only hike by 50bps, as mostly expected but disappointing the 75bps hawks and once again erring on the side of caution with economic projections showing the UK technically already in recession. Cue some GBP weakness again but with all the other stuff going on with JPY and CHF it was variable across many pairs. The MPC vote was 5-4 in favour of 0.5% with 3 preferring 0.75% and one bizarrely plumping for 0.25%. That conflict amongst themselves doesn't augur well moving forward. Today sees the widely anticipated but mostly leaked announcement of the new government's fiscal plans to help the UK economy but beware smoke n mirrors. Every present has its cost. Currently underway.
The SA Reserve Bank then hiked by 75bps but with two committee members on board for 100 bps amid weakening economic outlook and that confirms the current fragile backstory I've been warning of for a long while now. Attacking inflation has come too late and their best hope now is recession. Even equity markets are waking up to this gloomy reality-check, for the moment at least, and we've seen further retreats globally. Gold is treading water aropund $1670 but oil definitely leaking again with rally sellers quick to pounce. Throw the Ukraine/Russia war into the mix and it's not a pretty picture out there. USD meanwhile remains king of the hill. Fed Chair Powell and others speaking later today after their enforced blackout period.
Conjecture remains in these ever-fickle markets so don't over-analyse but be ready with your preferred levels/strategy. Look for appropriate risk verus reward. Discipline is key as always but equally hesitation can often ruin a great idea.
GBPUSD: Capped at 1.1350 again yesterday, then 1.1300, and we've seen 37-year lows of 1.1168 this morning as the 08.00 BST algo model bought a few USD and triggering stops to add to the general decline after. Patience a virtue still but I prefer that side still. Cross flows still having a big impact too. EURGBP: More two-way business in the past 24 hours after a quick dip to 0.8690 on the BOE announcement. Still capping at 0.8760 as core pairs move mostly in tandem.GBPJPY: A slightly steadier picture for this pair atm after yesterday's wild swings but still looking soggy at 159.00 amid all the fragile risk tones. More of the same ahead.
EURUSD: ThaT support around 0.9805-15 where my chart guru Les had identified key support too has finally gone this morning with help from the 08.00 BST algo USD buyer. Still looking fragile at 20-year lows 0.9770 with rallies limited to 0.9850 now. Pips gratefully banked again from those but keeping core shorts and I remain a rally seller as my preferred side. USDJPY: Failing to hold above 142.75 so far after its fun n games yesterday and the 140.50 lows helped by the risk-off JPY demand as equities continue to retreat and the BOJ threat. Not convinced the bullish trend has ended but still preferring the rally-sell side overall supporting my fragile-risk plays. Definitely expecting more 2-way business. EURJPY: Support at 139.00 being tested as I type amid the soggy risk tones. USDCHF: Sharp spike to 0.9850 post-SNB and now holding 0.9750 in the retreat amid the general USD demand. Some natural CHF demand still but SNB will be keeping an eye on matters.EURCHF: Now broken back down through 0.9600 amid the soggy EUR and risk tones after yesterday's SNB spike to 0.9700. SNB still casting its shadow.
AUDUSD: Now capping at 0.6660 amid the softer risk tones and USD demand but holding around 0.6580 in the retreat again as I type. GBPAUD capping at 1.7000 but holding 1.6900 so far. NZDUSD continues its journey lower and now posting fresh recent lows of 0.5802 amid the firmer USD/softer risk. GBPNZD capping at 1.9300 as GBPUSD retreat outstrips NZDUSD. USDCAD: Decent support coming at 1.3400 after the retreat from 1.3550 but rallying this morning to 1.3525 amid some softer oil/firmer USD tones. Expecting some two-way business overall still amid the fickle variables.
Let's continue to be careful out there.
Interbank rates: 08.17 BST