Calendar Week 42-2022

 

What a show we had last week. UK shenanigans from both the BoE and 10 Downing St had Pound, Gilts and Footsie swinging wildly. Whilst Putin’s nukes and US Inflation joined the party with markets initially ramping higher the CPI print, only to give it all back the next day. Fun times.

 

The week ahead brings more inflation numbers from NZ, UK and Canada. I think UK is a lame duck with inflation over 10% and BoE struggling to maintain any control (or dignity) over prices, not being helped at all by the reactionary Truss government. Will be hard to predict what will happen to the Pound post the inflation numbers.

 

We also get Chinese GDP and Aussie jobs. Both key numbers for the Aussie which has been the worst performer in recent weeks, even lost ground to the pound!

 

Currency Guidance

 

USD – After the inflation numbers the moves in the market indicated to me that we may have seen the high in the USD. Now I am back on the fence. I no longer wish to be a buyer or a seller. Technically it could go either way from here. Fundamentally it should be going higher with both safe haven and real yield flow…but bonds are not indicating a direction yet either. So we sit and wait for now.

 

AUD – As said above, the Aussie is down against all peers. It is also way over extended against most, Yen and Kiwi the exceptions, miles from the averages and closing on exhaustion of momentum indicators. No reason to be a buyer of Aussie, just warning not to be a seller out at these levels.

 

EUR – With the markets focused across the Chanel and across the Atlantic, the Euro has quietly found a base of support. Next weeks ECB will be key but we may have seen the low for the Euro….may, there is still a cold winter to come with Russia not shy of turning of the warmth from his gas pipes so that could make things nasty. I like the look of EURCHF showing inverse head and shoulder pattern.

 

GBP – Very tricky to trade such volatility when we get unexpected announcements from Bailey – “ you’ve 3 days to unwind positions” – which was 5 days ago and Truss flipping to the tune of the markets rather than leading the orchestra. I’d rather stay out of it and trade more predictable outcomes.

 

JPY – Kuroda lost his 145 bet, as the Yen weakened to almost 149. The yen weakened against all peers apart from AUD and NZD. CHFJPY looks the most enticing to trade this week.