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Dollar stays in control as the sell everything mood persists

Mon, Sep 26, 2022 9:50 AM

<p style="" class="text-align-justify">The pound may be stealing the spotlight but the dollar is continuing to go about its own business as it is pushing higher across the major currencies board once more in trading today. GBP/USD is now down 1.3% to 1.0710 after <a href="" target="_blank">a bit of a bounce</a> from the lows earlier but the pressure valve is still not turned off yet with no word from the BOE so far.</p><p style="" class="text-align-justify">Elsewhere, EUR/USD is down 0.4% to 0.9655 but at least off earlier lows of 0.9570 while USD/JPY is up 0.5% to 144.00 again as buyers stay poised in search of another potential test of 145.00 following the BOJ/MOF intervention last week.</p><p style="" class="text-align-justify">Commodity currencies are also staying pressured as equities are slumping. USD/CAD is up 0.3% to 1.3635 while AUD/USD is down 0.4% to 0.6500 as the dollar continues to hold firmer across the board.</p><p style="" class="text-align-justify">S&P 500 futures briefly pared losses in early European morning trade but are now back down by 0.9%. The June lows are in the crosshairs of sellers and a break below that will heap added pressure on risk sentiment to start the new week:</p><p style="" class="text-align-justify">In Europe, <a href="" target="_blank">UK bonds are imploding</a> and regional indices are also down across the board. The rout is very much a continuation of the sell everything mood in markets from last week, with 10-year Treasury yields also seen up 8 bps to 3.778% currently.</p> This article was written by Justin Low at

Japan FX intervention last week estimated to be around ¥3.6 trillion

Mon, Sep 26, 2022 9:29 AM

<p style="" class="text-align-justify">That's roughly $25 billion and eats into the country's FX reserves of about $1.29 trillion at the end of August, according to official reserves data. In any case, the final figure will be made available on Friday when the Ministry of Finance announces the total it spent for intervention this month.</p> This article was written by Justin Low at

Cable recovers some poise, now down "only" a little over 1%

Mon, Sep 26, 2022 8:21 AM

<p style="" class="text-align-justify">The low earlier hit 1.0357 (this may vary depending on your platform but definitely under 1.0400), which was an all-time low for the currency in the modern era so to speak. In part, a stronger dollar has definitely pushed GBP/USD over the edge from a technical perspective but there is also plenty to scrutinise about Friday's policy announcement - which has led to <a href="" target="_blank">UK bonds imploding</a>.</p><p style="" class="text-align-justify">In any case, there is a bit of appetite now as cable rebounds back to 1.0740 although it is hard to imagine this be but profit-taking and some light pressure being relieved after such a sharp move since the end of last week.</p><p style="" class="text-align-justify">The bigger question now for the pound is, will the BOE intervene in the market in some manner to arrest the decline in the currency?</p><p style="" class="text-align-justify">As mentioned earlier, an emergency rate hike is the most plausible option considering that the UK does not really have a significant chunk of FX reserves - no point burning through that at this stage. However, the big concern for policymakers surely is that what happens if they choose to raise the bank rate by 200 to 300 bps and still the pound ends up trading lower? What then?</p><p style="" class="text-align-justify">There's a big risk associated with intervening with Black Wednesday serving as a painful reminder of that.</p> This article was written by Justin Low at

Ifo economist: German economy is facing a recession

Mon, Sep 26, 2022 8:07 AM

<ul><li>Almost all economic sectors are in the minus</li><li style="" class="text-align-justify">Price expectations rose again, more than every second company set to increase prices</li><li style="" class="text-align-justify">Retail business expectations are at historic low</li><li style="" class="text-align-justify">Energy-intensive industries particularly pessimistic about winter</li></ul><p style="" class="text-align-justify">With inflation pressures keeping elevated and concerns surrounding the energy crisis not quite alleviated, the outlook for Europe's largest economy looks rather grim ahead of the winter months. A recession looms large and the big question now looks more to be, how bad are things going to get?</p> This article was written by Justin Low at

SNB total sight deposits w.e. 23 September CHF 747.1 bn vs CHF 754.5 bn prior

Mon, Sep 26, 2022 8:02 AM

<ul><li>Domestic sight deposits CHF 626.6 bn vs CHF 638.9 bn prior</li></ul><p style="" class="text-align-justify">A drop in overall sight deposits in the past week, coinciding with a raise in policy rates by the SNB. It also comes after a few weeks of increase so it is tough to read into the data yet even though it is quite a substantial change.</p> This article was written by Justin Low at

Germany September Ifo business climate index 84.3 vs 87.0 expected

Mon, Sep 26, 2022 8:00 AM

<ul><li>Prior 88.5; revised to 88.6</li><li>Expectations 75.2 vs 79.0 expected</li><li>Prior 80.3; revised to 80.5</li><li>Current conditions 94.5 vs 96.0 expected</li><li>Prior 97.5</li></ul><p style="" class="text-align-justify">This is a stinker of a report and won't do the euro much comfort as it just reaffirms a further deterioration in economic sentiment in Europe's largest economy. As <a href="" target="_blank" id="ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_1" class="terms__main-term">inflation</a> continues to stay elevated, that is weighing on demand ahead of a rather bleak winter in which the energy crisis will take center stage. Sure, Germany has enough gas storage to stave off a catastrophe but a recession is already on the cards surely.</p> This article was written by Justin Low at

UK bonds are imploding

Mon, Sep 26, 2022 7:26 AM

<p style="" class="text-align-justify">Borrowing record amounts at a time when the BOE is about to wind down its own stock of gilts is evidently taking a toll. A severely weakened currency, more BOE rate hikes and a current account deficit is all putting immense pressure on the UK outlook right now and it is showing up in the bond market.</p><p style="" class="text-align-justify">This may very well be the sign of a collapse in a market that is not able to accommodate the extra supply amid quantitative tightening. In essence, it is reflecting massive fears and unease over the financial stability in the UK. 2-year gilt yields have shot up by more than 100 bps since Thursday now to 4.50%. You really just have to see it to believe it with this one.</p><p style="" class="text-align-justify">Meanwhile, 10-year gilt yields are also up 70 bps in that same period to 4.20% today:</p> This article was written by Justin Low at

UK rates continue to shoot higher after Friday's surge

Mon, Sep 26, 2022 7:07 AM

<p style="" class="text-align-justify">That is the highest level since late 2008 as UK assets are responding as though like it is an emerging market since last Friday's budget announcement. 10-year yields are up 25 bps on the day to 4.08% - its highest since 2010. The pound is seeing a bit of a reprieve in a bounce to 1.0700 on the day, though it is still down 1.4%. That said, the low earlier touched 1.0357 so this is at least a bit of comfort after fears that it might just collapse all the way to parity in a free-falling move.</p> This article was written by Justin Low at

Eurostoxx futures -0.7% in early European trading

Mon, Sep 26, 2022 6:07 AM

<ul><li>German DAX futures -0.8%</li><li>UK FTSE futures +0.1%</li></ul><p style="" class="text-align-justify">The overall risk mood is keeping more defensive as markets stay in a sell everything mood for the most part. S&P 500 futures are down 0.7%, so that is reflecting continued pressure on equities at the moment. The DAX looks set for a drop below its 50.0 Fib retracement level (after having broken support from its March and July lows) and that will also put pressure on its 100-month moving average at 12,166.</p> This article was written by Justin Low at

German Ifo business survey on the agenda in Europe today

Mon, Sep 26, 2022 5:17 AM

<p style="" class="text-align-justify">The dollar continues to run hot in the new week as we carry over the same themes from last week. The most jarring move is seen in GBP/USD as the currency is down 3% on the day now to 1.0535, after having hit a low of 1.0357 earlier as the pound crashed hard following last Friday's steep drop.</p><p style="" class="text-align-justify">This is not your fat finger dial of a crash as the quid has already been under heavy pressure after the UK called for tax cuts (and more to follow) at the end of last week. The situation is playing out as you would see with an emerging market i.e. higher rates, weaker currency, and that says a lot about the UK predicament at the moment.</p><p style="" class="text-align-justify">Elsewhere, EUR/USD is down 0.6% to 0.9630 as traders look towards the 0.9500 level next while USD/JPY is up 0.6% again to 144.20 as the Japanese intervention begins to wear off. Commodity currencies are also under pressure with risk sentiment in the doldrums after last week's selloff. S&P 500 futures are down 0.7% currently.</p><p style="" class="text-align-justify">It is very much a continuation of the buy the dollar, sell everything else mood and unless we do see the BOE step in, there is little to distract from that in European morning trade.</p><p style="" class="text-align-justify">0800 GMT - Germany September Ifo business climate index0800 GMT - SNB total sight deposits w.e. 23 September</p><p style="" class="text-align-justify">That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.</p> This article was written by Justin Low at

All eyes on the BOE ahead of European trading

Mon, Sep 26, 2022 5:02 AM

<p style="" class="text-align-justify">In my opinion, this was best meme on the Fintwit at the end of last week:</p><p style="" class="text-align-justify">It essentially captures the mood in UK financial circles at the moment as well, with the freefalling pound needing a rescue by the Bank of England. The question is, what can the central bank really do?</p><p style="" class="text-align-justify">Verbal intervention is one but at this stage, they might need to send a bigger message to markets. That said, the pound is very much in the same situation as the yen when it comes to the intervention play. As much as the BOE would like to try and do something, the fundamentals dictate that the path of least resistance is still for a lower pound against the dollar.</p><p style="" class="text-align-justify">An emergency rate hike looks to be the most plausible tool but then again, I would argue it will just be a temporary solution. It will be their first line of defense for the currency and to convince markets, they will have to go big on this in my view.</p><p style="" class="text-align-justify">It's a tough situation to be in for Bailey & co. and that was indeed made much, much tougher after Truss' and Kwarteng's <a href="" target="_blank">budget announcement</a> at the end of last week. Oof.</p> This article was written by Justin Low at

Giorgia Meloni set to become Italy's first woman prime minister

Mon, Sep 26, 2022 4:49 AM

<p style="" class="text-align-justify">Just a bit of an update to Eamonn's post from earlier <a href="" target="_blank">here</a>. Italy's rightist bloc looks set for a clear majority in both houses of parliament, marking quite a change in times for the country. Will there finally be a chance for some form of political stability? Either way, a record low turnout in the polls has made it tough to really look into the results as being reassuring but we'll see.</p><p style="" class="text-align-justify">Giorgia Meloni is the leader of the alliance and looks set to take the helm, in what will be Italy's most right-wing government since WWII. It will mark a big change from Draghi's government in the past 18 months and it will be interesting to see what position they take on the Russia-Ukraine conflict.</p><p style="" class="text-align-justify">In any case, the same problems that are plaguing Europe will still befall Italy i.e. soaring energy prices, the gas crunch, the ongoing situation in Ukraine, and rising recession risks in the region.</p> This article was written by Justin Low at

Pound in freefall after Friday's tumble

Mon, Sep 26, 2022 4:33 AM

<p style="" class="text-align-justify">It was always going to be a tough ride for the pound after GBP/USD broke below the pandemic lows under 1.1400 but the pace of the drop in the past two sessions has been rather staggering. Stops were triggered on the way down on a break below 1.1200 and then 1.1000 before another plunge today in Asia trading to a low of 1.0357 (depends on your charts but it is below 1.1400).</p><p style="" class="text-align-justify">From a technical perspective, there really isn't any real support for cable to hang on to as it trades to its lowest levels since 1985. The lows then came in around 1.0520-45 and we're pretty much angling towards a firm break now, even if there is a slight bounce back to 1.0540 levels at the moment.</p><p style="" class="text-align-justify">It is but the decimation of the UK economy, despite the fact that the government is throwing the fiscal sink at trying to bolster growth conditions. Tax cuts are great, but not so much when you're trying to stimulate a failing economy at its core. When your policy announcements cause rates to rise but your currency to depreciate considerably, you are but the definition of an emerging market. That says a lot about the case in point for the UK at the moment.</p><p style="" class="text-align-justify">Shades of parity are now in the picture and it is tough to bet against the falling momentum in GBP/USD unless something fundamental changes. But at least after the steep decline recently, we may be overdue for a technical bounce - though it might just be a bit part reprieve at the end of the day if nothing else changes.</p> This article was written by Justin Low at

ForexLive Asia-Pacific FX news wrap: Cable collapse in Asia

Mon, Sep 26, 2022 2:58 AM

<ul><li><a href="">Recap of fin min Suzuki - Japan repeats readiness to respond to speculative yen moves</a></li><li><a href="">China's state banks ordered to buy stocks</a></li><li><a href="">Questions begin on what the Bank of England will do to stem GBP's drop off the cliff</a></li><li><a href="">PBOC imposes a 20% Risk Reserve Requirement on forward FX sales</a></li><li><a href="">PBOC sets USD/ CNY reference rate for today at 7.0298 (vs. estimate at 7.0019)</a></li><li><a href="">GBP/USD crash, under 1.0400</a></li><li><a href="">Japan preliminary September PMIs. Manufacturing 51.0 (prior 51.5) Services 51.9 (49.5)</a></li><li><a href="">Japanese ex-forex official says further yen buying intervention will be limited in scale</a></li><li><a href="">ICYMI - ADB said capital controls could be sued by China to counter weakening yuan</a></li><li><a href="">Australian Treasurer Chalmers - country not immune from "deteriorating" global outlook</a></li><li><a href="">Uk data - Rightmove House Prices for September +0.7% m/m (prior -1.3%)</a></li><li><a href="">Bank of Japan Governor Kuroda is speaking today - expect yen weakness comments</a></li><li><a href="">New UK PM & Chancellor setting fiscal fire to GBP risks a 100bp BoE November rate hike</a></li><li><a href="">JP Morgan: "Cracks are starting to show in the CAD macro outlook". See higher USD/CAD</a></li><li><a href="">Italy's election - exit polls show win for right wing bloc led by Brothers of Italy</a></li><li><a href="">NZD traders heads up - it's a one-off New Zealand public holiday today</a></li><li><a href="">Fed's Bostic says he is going to keep working to move inflation toward 2%</a></li><li><a href="">Economic calendar in Asia 26 September 2022</a></li><li><a href="">Monday morning open levels - indicative forex prices - 26 September 2022</a></li><li><a href="">The Dollar is King. What will keep it king this week?</a></li><li><a href="">Week ahead - highlights include Italy Elections, US PCE, EZ CPI, China PMIs</a></li><li><a href="">Another down day/week for the major indices. New 2022 closing low for the Dow.</a></li><li><a href="">Forexlive Americas FX news wrap: Dollar soars to new heights as the pound implodes</a></li></ul><p class="western"> It was an especially thinly traded early Monday in Asia today with a public holiday in New Zealand. Very early trade in GBP/USD took the pair to lows around 1.0765, carrying on its cratering during Friday’s trade. The early slump was soon recovered, GBP/USD ticked back to just under 1.0850 as liquidity improved a little. </p><p class="western">The bounce back was short-lived though. Cable turned back lower to under 1.0800 again. Trade was relatively orderly but with sellers prevailing until it fell under about 1.0750 when the bids were getting hit more heavily. Selling accelerated as it dropped faster, hitting lows under 1.0390 before bouncing a little. You’ll see some ‘fat finger’ and ‘flash crash’ explanations. These are on the wrong track. While the move was extremely wild and fast the selling was begun in response to fundamentals (the fiscally irresponsible budget announcement led to a massive offloading of UK Gilts and also the currency on Friday and that carried on here during the session) and was exacerbated by ‘just get me out’ selling. It remains to be seen if this is a capitulation move for GBP. Its hit its lowest ever. </p><p class="western">More widely, it was a session of USD strength. Major FX broadly fell against the USD. Much of that USD move has been retraced though.</p><p class="western">USD/JPY has maintained its bid tone though. As I update its just under 144.00. Bank of Japan Governor Kuroda is scheduled to speak soon (0530 GMT). </p> This article was written by Eamonn Sheridan at

China's state banks ordered to buy stocks

Mon, Sep 26, 2022 1:50 AM

<p>Thats the word out there with stocks jumping in Shanghai and Shenzen.</p><p>China's National Team is very responsive to Communist Party in instructions. </p> This article was written by Eamonn Sheridan at

GBP/USD crash, under 1.0400

Mon, Sep 26, 2022 1:01 AM

<p>No fat fingers here folks, this is good old fashioned get-me-outta-here selling</p><p>1.0330 seen. record low</p><p> 3 minute candles:</p><p>--</p><p>On futures markets the CME has halted GBP futures - circuit break pause </p> This article was written by Eamonn Sheridan at

GBP/USD collapsing further, smashed under 1.0700 - USD higher across the board also

Mon, Sep 26, 2022 12:57 AM

<p>Pounding the pound is the theme today. </p><p> The US dollar is soaring.</p><ul><li>USD/JPY above 144.00</li><li>EUR/USD close to 0.9600</li></ul> This article was written by Eamonn Sheridan at

GBP/USD under 1.0750, USD strong across the majors board

Mon, Sep 26, 2022 12:46 AM

<p>The US dollar is continuing to power higher. </p><p>Cable is straddling 1.0750. Its lowest since 1985.</p><p>JPY and CHF also notably struggling. </p><p>This is a 'more of the same' move. If USD strength is a surprise to you scan back over the site for the past few ... many, many months. It's a constant theme. GBP took an extra hit on Friday from the fiscally profligate UK budget announcement. </p> This article was written by Eamonn Sheridan at

Japan preliminary September PMIs. Manufacturing 51.0 (prior 51.5) Services 51.9 (49.5)

Mon, Sep 26, 2022 12:36 AM

<p>Jibun flash PMIs from Japan for September. </p><p>Manufacturing 51.0 (slowest in 20 months)</p><ul><li>prior 51.5 </li></ul><p>Services 51.9 </p><ul><li>prior 49.5</li></ul><p>Composite 50.9</p><ul><li>prior 49.4</li></ul> This article was written by Eamonn Sheridan at

Australian Treasurer Chalmers - country not immune from "deteriorating" global outlook

Sun, Sep 25, 2022 11:41 PM

<p>Chalmers was speaking with national public broadcaster ABC in Australia on Monday, 26 September 2022.</p><ul><li>Australia not immune from the "deteriorating" global outlook</li><li>remains optimistic about the near future of the Australian economy</li><li>Interest rates are rising, it costs more and more to service ... debt</li></ul><ul><li>flagged tax hikes ahead</li></ul><p>----</p><p>Chalmers delivers his first full budget on October 25. </p> This article was written by Eamonn Sheridan at

Uk data - Rightmove House Prices for September +0.7% m/m (prior -1.3%)

Sun, Sep 25, 2022 11:15 PM

<p>This is very low-tier UK data. </p><p>The Rightmove House Price Index measures the change in the asking price of homes for sale (note that asking prices do not always reflect selling prices ... d'uh ;-)).</p><p>Along with rampant US dollar strength the influence on GBP since Friday has been the UK government's latest plan to fire up the economy:</p><ul class="text-align-start vertical-align-baseline"><li><a href="" class="article-link">UK budget anything but "mini"</a></li><li class="vertical-align-baseline"><a href="" class="article-link vertical-align-baseline">UK finance minister says will scrap planned increase on corporation tax</a></li></ul><p><a href="" target="_blank" data-article-link="true">Forexlive Americas FX news wrap: Dollar soars to new heights as the pound implodes</a></p><p>GBP has been smashed, and the move extended slightly in early hours here in Asia:</p><ul><li><a href="" rel="follow" target="_self" class="vertical-align-baseline">GBP/USD update, still under 1.08</a></li></ul><p>As I update cable has climbed back, its circa 1.0830 as I update:</p> This article was written by Eamonn Sheridan at

JP Morgan: "Cracks are starting to show in the CAD macro outlook". See higher USD/CAD

Sun, Sep 25, 2022 10:01 PM

<p class="western" align="left"> This via the folks at eFX. </p><p class="western" align="left"> For bank trade ideas, <a href="" target="_blank">check out eFX Plus</a>. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. <a href="" target="_blank">Get it here</a>. </p><p>JP Morgan Research sees a scope for further USD/CAD upside and likes to play it via option exposure (call spread).</p><ul><li> "Cracks are starting to show in the CAD macro outlook. It's too early for broad-based CAD underperformance but USD/CAD can start to make new highs as US-CA similarities start to wane.</li><li> "The Fed hiking deeply into restrictive territory while global growth shows little sign of stabilization also warrants a higher USD/CAD bias, " JPM adds.</li></ul> This article was written by Eamonn Sheridan at

Italy's election - exit polls show win for right wing bloc led by Brothers of Italy

Sun, Sep 25, 2022 9:09 PM

<p>Exit polls are showing the bloc winning 41 to 45%, which is enough for a parliamentary majority </p><ul><li>Brothers of Italy circa 22 - 26 %</li><li>League on circa 8 - 12%</li><li>Forza 5 -9 %</li></ul><p>The Brothers of Italy party is led by Giorgia Meloni. She looks set to become the next PM and Italy's first female PM. </p><p>Its difficult to say if this will usher in a period of stability for Italian politics, given the priors. But ... with a majority there is a chance cobble together a coalition at least for the short term and see how it goes from there. As for <a href="" target="_blank" id="b0427fd7-674c-4ad1-b689-22d1f8b087b0_1" class="terms__main-term">EUR</a> impact, perhaps 'potentail stability' is enough for a bid, at the margin. </p> This article was written by Eamonn Sheridan at

GBP/USD update, still under 1.08

Sun, Sep 25, 2022 8:49 PM

<p>I posted earlier on the follow through cable selling in super-early, super-thin liquidity New Zealand session (and it's a New Zealand holiday too!).</p><p>Cable is circa 1.0795, up a little from its really early lows. </p><p>Of course, the collapse in GBP/USD continued on Friday, this morning just added a little to the losses. Its still very early (prior to 7am in Sydney/Melbourne, prior to 6am in Tokyo, prior to 5am in Singapore & Hong Kong).</p><p>Chart is representative of the Reuters matching engine trades this morning so far:</p> This article was written by Eamonn Sheridan at

NZD traders heads up - it's a one-off New Zealand public holiday today

Sun, Sep 25, 2022 8:49 PM

<p>The New Zealand Government set a one-off national public holiday on Monday 26 September 2022. Its to mark the passing of Queen Elizabeth II.</p><p>Markets are closed in New Zealand today.</p><p> Separately, New Zealand switched to daylight savings over the weekend. Clocks in the country were wound forward an hour.</p> This article was written by Eamonn Sheridan at