Rollercoaster ride after US inflation data
Wednesday 15 February 2023
Yesterday's US CPI headline readings for January came in the high side as expected but there was some interesting notes in the revisions (also expected) and data detail. Cue USD demand, supply, demand. supply and then finally demand again as markets continue to second-guess but seemingly coming down on the side of further hawkish need from the FOMC.
UK inflation data this morning shows a welcome softer than expected reading but still remains a concern and still pointing to a 25bps BOE hike in March. The battle is by no means won just yet as we saw yesterday across the Pond. RBA's Lowe has also been out repeating recently reported hawkish tones and warning rates may have to go higher.
Equities had their own rollercoaster ride of course but are off their lows again this morning as I type but some good tw0-way business post-CPI data as the CB second-guessing continues. WTI is trading near its retreat lows of $77.75-80 this morning having failed at $79.00 then $78.50 in Asia. Gold has finally broken down through $1850 but still tightly bound and holding an old support line at $1830-35 amid the uncertainty. Ukraine/Russia war continues to be the elephant in the room amid other geo-political risk.
GBPUSD: Finally breaking up through 1.2250 yesterday after a hold of 1.2150 post-CPI but failing into 1.2280 as the weight of th 1.2250 supply that I had warned about, kicked in and USD demand returned too. Finally breaking down through the pivotal 1.2120 area this morning on post-UK inflation data and renewed USD demand but holding 1.2075-80 so far. I remain a rally seller but caution required still. EURGBP: A good hold of 0.8820 and rallying as GBP supply returns post-UK inflation and testing 0.8875 now.Expect some more two-way trading as core pairs fluctuate. GBPJPY: A support line now forming at 161.00 and capping around 162.00 with sellers poised still amid the generally fickle risk sentimenmt.
EURUSD: Holding 1.0700 in the latest retreats with more option interest there today and popping back up through 1.0720 as i type. I remain a rally seller as my preferred side still but caution required today ofc.USDJPY: Now up through the decent 132.80-00 resistance/offers after holding 131.50 and now 132.50 in Asia so far amid the USD demand returning after the post-CPI rollercoaster ride. Poised to re-sell rallies when momentum fades but caution required still.
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Interbank rates: 08.47 GMT