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  • Writer's pictureMike Paterson

Pound makes further gains as inflation heads ever-higher

Wednesday 17 November 2021

Further buyers of the Pound notable in the past 24 hours helped by a tumbling EURGBP again after breaking down through 0.8440 amid the general EUR weakness that I've been highlighting. Throw in some firmer risk GBPJPY demand still and now some strong UK inflation data this morning to create an ever-heady mix.

BOE rate hike speculation grows again naturally and markets regard it nailed on now for December if the MPC are true to their word but that can't be guaranteed. The Pound saw rapid gain post-data but once again retreating as the rate hike excitement is factored in. FTSE lower on the rate hike factoring.

It's still a case of "what next" as markets and traders continue to second-guess the central banks everywhere with some fragile risk sentiment lurking amid rising COVID cases in Europe and political unease around Ukraine, Taiwan and elsewhere. USD is generally firmer still with the US Dollar index hitting highs not seen since July 2020 after some strong US data while equity markets and yields are still underpinned overall, as is oil. Gold is off its 1850 retreat lows.

GBPUSD: Support coming in at 1.3400 again and some pips banked but now capped at the strong 1.3480 sell interest post UK inflation data after breaking the previous line at 1.3450. Re-sells duly placed along the way but remains underpinned by firmer GBPJPY and softer EURGBP overall even the latter has rebounded from its 0.8390 lows. I remain a rally seller overall while keeping track of EURGBP and GBPJPY as always. EURGBP: We saw some stablisation yesterday around 0.8450 understandably in the wake of the previous tumble from 0.8520 but then the selling renewed and we've seen a break of the strong 0.8400 area post UK data this morning before bouncing back to 0.8420 as GBP rally sellers returned. Still dangerous to bottom-pick at the moment though amid the general EUR supply.Good size option interest down here tody and tomorrow in the mix too.

GBPJPY: 153.80 resistance now gone as GBP finds those fresh buyers and USDJPY trends higher on the firmer USD tones but sellers at 154.75-80 prevailing at the moment and in retreat to 154.20.

I remain a GBP rally seller across the pairs overall as my preferred trading side albeit still against the grain currently so being patient as ever. These markets are ever-fickle so good/tight position management essential.

EURUSD: Support at 1.1300 broke and triggered stops down to 1.1265 in a rush amid the general EUR weakness/firmer USD tones but now testing 1.1315-20 on the rebound. I still expect any bounce to be less than impressive amid rising COVID cases, dovish ECB,and cross-flow action. USDJPY: Underpinned now at 114.50 after yesterday's break amid the firmer USD/risk double whammy but finding 115.00 a step too far at the moment. EURJPY: 129.40-50 still providing some support so far but rally sellers still poised as I've been warning.

USDCHF: Support coming in now at 0.9280-00 helped by the generall firmer USD tones and with the SNB ever vigilant and aware that EURCHF is under pressure again. EURCHF: 1.0500 still holding the retreats with the SNB ever vigilant but those sellers in the rallies still prevailing amid the EUR weakness.

AUDUSD: 0.7320 support now history after those rally sellers at 0.7350-60 duly helped cap amid firmer USD tones and softer wages data lending support to the RBA's dovish talk. Pips duly banked in the retreat to 0.7260 but a little early again. Large options nearby rolling off today. USDCAD:1.2540 now holding after a failure at 1.2585 as some CADJPY demand helped cap at but supported by general firmer USD.

Let's continue to be careful out there in all things. Staying safe must be our main priority still.

Interbank rates: 08.46 GMT

GBPUSD 1.3446

EURUSD 1.1320

EURGBP 0.8417

GBPEUR 1.1878

GBPJPY 154.37

GBPCAD 1.6887

GBPZAR 20.8670

GBPHKD 10.4698

USDJPY 114.81

EURJPY 129.98

EURCHF 1.0534

EURHKD 8.8145

AUDUSD 0.7291

USDCAD 1.2540

USDCHF 0.9306

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