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*Good morning/afternoon everyone!*
Right off the bat, the Bank of England shocked the markets today with 3 members calling for an immediate rate hike! Recent data including this morning’s UK retail sales report was terrible and yet, McCafferty, Forbes and Saunders think tightening is needed because core inflation has been stronger than expected and could overshoot while global growth and confidence is improving. They also see slack in the labor market diminishing. It was not enough to move rates today but its certainly an unexpectedly hawkish development. GBP should see more gains on this particularly vs. EUR, JPY and CHF.
Meanwhile today is an example of why picking the right pair combination is really important in trading. While the U.S. dollar is struggling to extend its gains versus JPY, it is higher against EUR and GBP (before BoE), allowing us to bank profits on our EUR/USD #1_easy2follow_trades. USD/JPY has a lot of resistance between 109.80 and 110 and then again at 110.66. With U.S. rates ticking only modestly higher, it may be a very slow crawl upwards for the pair. While we still see further losses in EUR, we bailed out early on our EUR/USD short because German 10 year yields are up significantly more than U.S. yields this morning. At the same time commodity currencies are losing their ground with AUD/USD flaming out despite strong labor data. NZD and CAD are likely to underperform EUR and USD.
*The MAIN THEMES I see today are*
EUR, CHF weakness
NZD, CAD underperformance
These will change after US data
-EUR, -CHF, -CAD, -NZD
neutral AUD, JPY
*Today’s Potential Ideas*
Sell EUR/GBP at market now 0.8740, Stop at 0.8790, Target 0.8710
Buy USDCHF at market now 0.9738, Stop at 0.9688, Target 0.9768