Risk-off prevailing and Pound awaits BOE decision
Thursday 18 June 2020
US-China tensions grabbing headlines again as are rising COVID-19 cases in both countries, and elsewhere, and markets are rightly favouring the risk-off side again after a day of consolidation. Still very fickle out there though so we continue to take nothing for granted.
The Pound remains pressured but holding on ahead of the BOE decision at 11.00 GMT today as markets price in more QE of between 100-200bln. The question is, how much exactly will we get. Meanwhile Merkel says she is not expecting a decision on the EU Recovery Fund tomorrow, merely an exchange of views.
GBPUSD yesterday failed above 1.2580 before finally breaking lower amid the softer risk plays and BOE casting a shadow and we've seen a test below 1.2520 a couple of times since but equally sellers above 1.2560. EURGBP continued its retreat again to test 0.8930 (GBPEUR up to 1.1200) but since rallied to now test 0.8985 (1.1130) as I type as GBPUSD retreats again this morning. GBPJPY peaked around 135.20 and been down to 133.67 on the softer risk helping to keep pressure on core pairs after the bounce capped into 134.40.
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. I still expect to see some dip demand though given the recent rallies. Today is all about how the BOE decision is received and I will send out some further thoughts prior.
USDJPY failed into 107.50 and we've been down to 106.67 amid the risk-off Yen demand. Rinse n repeat still. EURJPY failed around 121.20 but finding support/demand into 119.80 on the retreat and now back up through 120.20.
EURUSD capped into 1.1300 and has once again made its own retreat on the softer risk to test 1.1200 but now seems to have a line of support forming around 1.1220 again amid cross-pair flows.
USDCHF failed at 0.9520 as EURCHF retreated again but still holding 0.9480 with the SNB seemingly drawing another line under it. The latest SNB policy decision earlier left rates on hold as expected along with further promises to intervene as necessary which we also knew.
AUDUSD had its own retreat again from 0.6920 to post 0.6837 amid the softer risk but some dip demand notable again.USDCAD failed above 1.3600 again but another retreat since to test 1.3540 on some firmer oil price action.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 08.18 BST