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  • Mike Paterson

Rising inflation remains in focus

Wednesday 14 July 2021

US CPI yesterday and UK CPI this morning both came in well above expectations and once again stoked the tapering fires while putting a bid under the respective currencies while equity and commodity markets have remained mostly underpinned. Poor appetite for US 30 year bonds also notable.

Euro pairs have all seen further declines as I've been warning as the consensus remains that the ECB will be slow to taper.RBNZ have delivered more hawkish tones even than expected and that's sent NZD on another decent move higher. It's the BOC's turn next at 14.00 GMT with talk of a C$1-2bln taper, and before that we have US PPI data in the mix at 12.30 GMT to add to the inflation fever. French markets closed for Bastille Day.

Patience and discipline in trading are key as ever and not being greedy as we continue to range tightly overall but good to see some greater levels of intra-day volatility return.

GBPUSD: A good hold of 1.3800 in the past 24 hours helped yesterday by decent option interest per my tweet. EURGBP breaking down through 0.8530 now helping to underpin GBPUSD too along with GBPJPY dip demand into 152.50. Good two-way jobbing pips whatever your bias. I remain a rally seller while keeping an eye on EURGBP and GBPJPY as always.EURGBP: The strong 0.8530-35 support area is now history and helping to underpin GBPUSD. I've been warning this week that rally sellers were poised and they've now prevailed smid the general EUR weakness.GBPJPY: Good two-way business amid the variable risk tones but holding 152.50 amid the core pair demand.

I remain a GBP rally seller across the pairs but being patient as ever. Risk to the downside though still overall.

EURUSD: Capped at 1.1860 this time and needed little excuse post- US CPI data to fall and test 1.1780-00 amid the general EUR weakness. Some option interest in play today that might help contain given the extensive move in past 24 hours but looks weak overall still.

Offers: 1.1800, 1.1815-20, 1.1835, 1.1850, 1.1865, 1.1880-85, 1.1900, 1.1920-25, 1.1950

Bids: 1.1775-80, 1.1765, 1.1750, 1.1730, 1.1700, 1.1680, 1.1660

USDJPY: A good hold of the pivotal 110.20-30 area in yesterdays retreat from 110.60 and some pips banked before the rally to 110.70. More re-sells duly placed and part hedge for GBPUSD shorts too. EURJPY: 130.50 support line now history with rally sellers prevailing at 130.60.USDCHF: Decent support line at 0.9170 now with the SNB ever vigilant after yesterday's failure at 0.9200 again. EURCHF: Support line now a little lower at 1.0820 with SNB shadow/help ever present but rally sellers still poised as I've been warning.

The SA Rand continues to weaken across the board amid the domestic unrest with USDZAR now up at levels not seen since April.

AUDUSD: A retreat from 0.7480 this time with that very large option interest at 0.7500 tomorrow casting a shadow but 0.7420-30 holding this time per my tweet. AUDJPY moves having an impact too of course.USDCAD: Strong support area now at 1.2480 amid firmer USD ahead of today's BOC decision so sellers ppised on the hawkish expectations. How hawkish will be the key here. 1.2500 has large options lurking this week too as I warned previously.

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

Interbank rates: 08.40 BST

GBPUSD 1.3848

EURUSD 1.1793

EURGBP 0.8515

GBPEUR 1.1743

GBPCAD 1.7307

GBPJPY 153.04

GBPZAR 20.4115

GBPHKD 10.7364

USDJPY 110.51

USDZAR 14.7433

EURJPY 130.31

EURCHF 1.0825

EURHKD 9.1428

AUDUSD 0.7461

USDCAD 1.2498

USDCHF 0.9180

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