Another rollercoaster ride but firmer risk tones notable this morning as we wait on the latest decision from the ECB today where a 25bps rate cut is widely expected but, as always, the real interest will be in the future direction/pace of further easing. Yesterday's US core CPI data came in slightly above expectations which spooked markets and this time reducing expectations of a 50bps rate cut from the FOMC next week. The Greenback initially rallied with the move led once once again by USDJPY and Yen cross-flows which then saw a rapid retreat as risk tones softened with equities under pressure.
Not for long though and we were soon witnessing a decent rally in equities, USDJPY and therefore JPY and CHF supply helping to support core pairs through the cross flows too. Overnight that JPY supply has continued with comments from BOJ's Tamura saying the pace of rate hikes would be on the slow side in the wake of Japanese inflation data coming in under expectations. Some softer risk tones returning though as I type.
Apart from today's ECB decision we also need to look out for US weekly jobless claims and PPI at 12.30 GMT. The Fed is in blackout so no FOMC speakers for the next week. While the CB, political and currency second-guessing continues, not to mention the geopolitical tensions, remember you need to identify your preferred risk reward levels and let the algos do their thing along with the natural and speculative flows. Don't get greedy or over-analyse.
Equity markets once again found some dip demand after falls yesterday but softer again this morning so far amid the uncertainty. WTI also found some dip demand at $66.50 but capping at $67.80-00 in the better-risk rally so far. Gold still treading water between $2510-25 amid the fickle risk sentiment.Dip demand should remain but sellers still poised.
GBPUSD: Support at 1.3000 yesterday in the post-CPI retreat but a rally back to 1.3050-60 since with the ongoing GBPJPY cross flows continuing to provide impact. I remain a rally-seller still overall but good two-way business to be had.EURGBP: Finding support at 0.8438 after capping at 0.8465 in yesterday's extended rally amid the variable USD and JPY flows. ECB/BOE rate cut conjecture continues too now with ECB looming today but large EURUSD option interest in play too. GBPJPY: Another risk-off retreat as USDJPY reversed its initial post-CPI gains but holding 184.80 and rallying to 186.60 as JPY supply returned.Two-way pips to be had still. Expect more of the same.
EURUSD: A hold of 1.1000 yesterday where we have very large option contract interest rolling off today which I warned about yesterday here and in my tweets but capping at 1.1025 where we have more options and we continue to range tightly as even more option interest lurks above 1.1040-55 amid any US data/ECB fallout. I remain a rally seller overall. USDJPY: Capping at 143.00 this morning as softer risk tones return after yesterday's strong rebound from the equally rapid retreat into 141.30-35. Great two-way business whatever your preference but mine's playing the rally-sell side still. Entry level/patience remains key for both sides. EURJPY: Finding support around 156.10-20 in yesterday's retreat but now finding sellers prevailing around 157.50-60 amid the ongoing JPY and USD variables. ECB today.
USDCHF: Support at 0.8480-00 yesterday once broken amid the USD demand/ better risk rally returning but capping at 0.8550 this time. Expect more two-way. EURCHF: Capping into 0.9420 now as softer risk tones return after the CHF supply rally from 0.9360 with EURUSD contained. Expect more two-way business with ECB today.
AUDUSD: Holding 0.6655 but capping into 0.6695 helped by some AUDJPY supply returning after the better-risk rally. Expect more two-way business in these ever-fickle markets. I prefer rally-sell side still. GBPAUD: Holding 1.9480-00 in yesterday's extended retreat as GBP supply outstripped AUD but capping at 1.9580-00 amid the core and cross pair variables. NZDUSD: Capping into 0.6160 again but holding 0.6120-30 now as we continue to range amid the variable USD and risk flows. GBPNZD: Holding 2.1200 but currently capping at 2.1280 with other cross flows in play still.
USDCAD: Holding 1.3565 yesterday and today but capping at 1.3585 amid the fickle USD/risk tones with CADJPY flows and oil in play too as ever. Expect two-way business still.
Let's continue to be careful out there.
Interbank rates: 08.45 BST
GBPUSD 1.3043
EURUSD 1.1011
EURGBP 0.8440
GBPEUR 1.1846
USDJPY 142.78
GBPJPY 186.22
GBPCHF 1.1146
GBPZAR 23.4627
GBPHKD 10.1582
USDCHF 0.8544
EURCHF 0.9406
EURHKD 8.5723
AUDUSD 0.6680
NZDUSD 0.6141
USDCAD 1.3571
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