1 Minute Market Rundown – 23rd September 2022
BOJ Sets the Market Up and Intervenes
BOE Raised 50 and is Clearly Divided
No Respite for Risk Assets – Except (Whisper It) Crypto
Well the Bank of Japan set myself and the market up beautifully yesterday. After keeping interest rate policy unchanged they said at a press conference they expected no request for intervention in the FX market. Fifteen minutes later they intervened to sell USD/JPY for the first time in 24 years, sending the pair from 145.90 to 140.33 before stabilising. This caused a spike in Euro/USD and GBP/USD which were quickly unwound as cross yen selling took over. Short Yen has been the trade of the year and looked set for further progress until yesterday. Whilst intervention rarely works in one effort I believe for now it should be respected and I am happy to sit short USD/JPY and EUR/JPY adding on rallies. I expect the BOJ to act again if the market trades towards 143.50 and beware the Monday morning efforts in thin liquidity. I suspect we see 138 before 145.
Elsewhere the SNB raised rates 75Bps in a unanimous move but the Bank of England delivered just 50Bps in a split vote which included a vote for just 25Bps. This sort of division will offer the beleaguered pound no respite and all eyes will switch to the “mini” budget being announced this morning, with widely touted tax cuts doing nothing to stem the inflationary effects hampering the UK. The desk remain big fans of selling GBP above 1.1325 targeting a move to 1.1000.
Risk markets broadly sagged again as the combination of central bank action and tensions in Ukraine undermine investor confidence. It is very hard to see where a Friday rally comes from, unless you take a look at Crypto markets. Often this year Crypto has been the tail that wags the dog. The rally yesterday led by ETH and closely followed by BTC did not stop when US stocks took a late tumble. Could it be simply the recent liquidation has finished or are we trying to find a base? Pay your money and take your
As always, good luck out there!
Richard Usher – Head of OTC Trading
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