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BoE help GBP, but can it last?

Good morning


GBP survives another day, with some help from BoE who committed to unlimited bond buying in an effort to ensure an orderly functioning market. GBPUSD had traded down to mid-1.05s but eventually found a bit of support which took it to just beyond 1.0900. As we’ve come to expect, it couldn’t hold those levels and sits just below 1.0800 as I type. Still hugely vulnerable, but so far BoE seem to have settled things down a tad.


I see some Tory MPs are already calling for Truss and Kwarteng to resign over the crisis that followed the mini-budget, and I think we are all hoping to see or hear something that goes some way to reassure us that all is well in hand. Truss is apparently doing several interviews today, ,lets see how well she copes with that. We also hear from BoEs Ramsden.


EURUSD also had a brief rally yesterday which took it to 0.9740, now 100 pips off those highs. Gold has had an interesting session, yesterday trading from lows around $1616 all the way up through the $1655 area which offered support last week, onto a high just above $1660. As with GBP and EUR, it was unable to hold those levels and this morning we see it down to low $1640s.


So although BoE clearly helped GBP, the moves we have seen look more like general USD moves, given GBP, EUR and gold ave all moved in similar patterns. No doubt GBP would be lower if BoE had done nothing, but a quick look at GBPEUR sees the pair around 1.1185, not far from where it has been for the last day or so, other than the peaks and troughs yesterday. Feds Evans said a rate of around 4.50% by year end would be mildly restrictive but did talk of eventually slowing the rate of increases.


USDCNY fixed at 7.1102, a touch lower than yesterday despite USDCNY trading well above that level. China have warned against speculative trading of CNY, which did see USDCNY fall sharply to around 7.1550 but as much as China may not like it, as with EUR, GBP, gold and others, it is USD strength that is driving USDCNY higher.


So looking to the day ahead, we’ll be looking at central bank speakers and US data this afternoon. In my mind GBPUSD remains a sell on rallies, this has been my thinking for some time now and I’m not sure what will have to happen to change my mind. Perhaps not until the Fed really do slow down rate increases.


I am intrigued by the sabotage on the NordStream pipeline. I cannot work out who to blame here. Russia are the obvious candidates although I believe the gas comes from them anyway so surely they could just turn it off. It would however mean they can perhaps restrict gas supplies without actually saying that is what they are doing, it may also being NordStream2 into play, although my knowledge of the advantage of one over the other is not great enough to know if this is even a vague reason. I don’t really see any other candidates. There are other countries who may enjoy supplying gas to Europe but I’m not sure any of them would go so far as to attack such infrastructure.


Looking to the day ahead, we’ll be looking at central bank speakers and US data this afternoon. In my mind GBPUSD remains a sell on rallies, this has been my thinking for some time now and I’m not sure what will have to happen to change my mind. Perhaps not until the Fed really do slow down rate increases. UK GDP due out early tomorrow morning.



- 10.00 EU consumer confidence

- 12.30 BoEs Ramsden speaks

- 13.30 US GDP, initial jobless claims, PCE

- 13.30 CAD GDP

- 18.00 ECBs Lane speaks

- 23.45 NZ building permits

- 00.30 Japan unemployment

- 00.50 Japan industrial production, retail trade

- 02.00 China caixin manufacturing, non-manufacturing PMIs

- 07.00 UK GDP

- 07.00 German retail sales


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