Pound under pressure still
Tuesday 18 October 2022
Another rollercoaster day for the Pound with a decent rally on the u-turns from Fin Min Hunt only to run out of puff as markets realised there's not a lot more he can do and the political uncertainty remains. PM Truss will seemingly keep her job for the moment if only for the reason that both her MP supporters (few) and opponents (many) fear the further fallout from sacking her at this stage.
The FT reported from "sources" that BoE will pause plans to begin quantitative tightening on Oct. 31 until the gilts market becomes calmer but BOE denying the story this morning. GBP remain under pressure.
Elsewhere equities rallying again and risk sentiment has generally been better over the past 24 hours but remains fragile . Oil is heading higher again as I type but gold off its latest rally highs. JPY supply remains notable overall while the Euro has found a bid again for the moment as ECB rate hikes return to the market's focus. Mixed USD tones overall.
GBPUSD: A strong rally to test 1.1450 yesterday on the intial response to mini-budget unwinding but capped at 1.1440 a couple of times then a fall again in Asia from 1.1420 amid the UK political, and economic, uncertainty to test 1.1300 before bouncing. Staying with the same rally-sell strategy. EURGBP: Finding support below 0.8600 in yesterday's retreat but sellers prevailing above 0.8700 so far today. I expect more two-way business to continue with the Eurozone facing issues of its own but the UK definitely still the main focus. GBPJPY: Underpinned at 168.50 this time after the extended rally yesterday to test the heady heights of 170.00 amid the GBP and USDJPY rally. Beeter risk sentiment helping too but USDJPY still vulnerable to BOJ intervention/USD sentiment turnaround albeit underpinned into 148.50-80 now.
EURUSD: A good holds of 0.9820 since the break up through 0.9780 amid the renewed EUR demand took us to 0.9874. Cross flows, risk, Ukraine and ECB conjecture all in the frame still as well as USD flows. USDJPY: Marching ever-higher to 149.25 amid some general USD demand and JPY supply but we've just had another sharp drop to 148.20 as I'm typing on MOF interest but now back to 148.90. EURJPY: Capping at 147.00 but holding 145.80 in the rapid drop just now and now 146.75 again. USDCHF: Capped at 0.9980 area again as EURUSD remains underpinned but SNB never far away as we hold 0.9920. EURCHF: Holding 0.9780 with SNB smoothing still and renewed EUR dip demand but sellers poised above 0.9820-30
AUDUSD: Support now around 0.6275-80 but sellers remain poised around 0.6325-30 amid the general USD demand.NZDUSD holding 0.5620 in latest retreat but sellers remain poised at 0.5700. USDCAD: A good hold of 1.3650 this time amid oil rally capping and general USD demand. Variable (and this morning rapid) CADJPY flows impacting too