1 Minute Market Rundown – 13th October 2022
GBP Roller Coaster
BOE About to Pull Support
CPI Data a Huge Event Today
Trading GBP has become not for the faint hearted. Over the last 48 hours we have visited 1.0925 and 1.1180 in a fashion that is more accustomed to an EM currency than a major FX pair. The BOE has signalled that their support for the bond market will end this week and sent the blunt message to pension funds that they have until Friday to get out of their positions. This is of course before the BOE plans to flip their process and reduce their balance sheet. The fact that GBP has recovered is more down to distressed repatriation of assets rather than any positives for the pound or the UK. We continue to short the currency on any rally and feel a visit back to the lows beckons sooner rather than later.
Elsewhere the FOMC minutes were released last night which firmly indicated more rate hikes are coming (no shock there) but there were slight undertones of caution building which caught my eye. Probably not a story for today, but should we get a weaker CPI the reaction could be more extreme than the market expects.
Turning to the main event of the day we receive US CPI at 1.30 UK time and it is fair to say it holds the key to the next move. Expectations are for a number dropping back from 8.3% to 8.1%. I have no opinion on what the number will be but the reaction will be severe should we get a number starting with a 7, seeing the USD sell off and risk assets rally hard as investors bring forward the time frame of a FED pivot. Conversely a number 8.2 or above will see a continuation of the USD uptrend and risk assets suppression.
Crypto markets remain broadly unchanged, drifting around waiting for a party to join. The levels are clearly defined and if we get a weak CPI the DJ may just crank up the music and the games begin. Sadly it is a big IF….
As always, good luck out there!
Richard Usher – Head of OTC Trading
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