Pound retreats amid US Dollar demand
Thursday 4 June 2020
Some variable risk sentiment in the past 24 hours and USD buyers prevailing has seen the Pound suffers a few losses across various pairs as GBPUSD came back down through 1.2560 and EURGBP finally broke up above 0.8920, both levels I had highlighted here and tweeted frequently. Further warnings from BOE Governor Bailey about preparing for a No-Deal Brexit added to the reality check along with increased civil unrest on London's streets.
Adding to the USD demand were better than expected ADP jobs numbers ahead of the key Non Farm Payrolls data tomorrow. Today's main event sees the latest ECB decision and press conference. Expecting no real change in policy but an increase in PEPP being reported and as always we wait to see what Lagarde can drop into the presser.
GBPUSD held 1.2560 into the options expiry interest and immediately rallied to break up through 1.2600 before failing at 1.2615 and now testing 1.2500.EURGBP finally broke 0.8920 amid the general EUR demand and now testing 0.8960 (1.1160) adding the GBPUSD retreat.GBPJPY capped at 137.40 as risk appetite softened a little and GBPUSD fell back from 1.2600 but 136.40 holding for the moment.
I stay poised to sell GBP rallies overall and buy back in the dips as ever but patience continues to be a virtue and entry level key as always. Starting to see some degree of reality check on recent GBP strength but some dip demand expected.
USDJPY broke up through 109.00 after holding 108.50 amid the general USD demand but failing to make much progress so far with some JPY demand returning. EURJPY remains underpinned on core pair dip demand but capped so far around 122.50. EURUSD duly found itself contained by those large option expiries between 1.1210-20 but also rallied afterwards only to cap around 1.1250 where we have more expiries today between 1.1240-50 and now retreating through 1.1200 amid the general USD demand. USDCHF found sellersat 0.9650 as per my update yesterday but still holding 0.9600 after a retreat that also saw EURCHF fall back through 1.0800 to test the 1.0760 bids.Still expect SNB in the dips.
AUDUSD held 0.6860 and saw another rally helped by some large AUDJPY demand again but failed at 0.6950 and fell to test 0.6880. USDCAD has been up to 1.3570 but fell to look at 1.3480 again as the BOC left rates on hold and repeated that 0.25% would be the floor. Been back to look at the pivotal 1.3530 amid the firmer Greenback and softer oil combo but falling again as I type.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 08.35 BST