Market update from SaxoBank

Currency:	GBP/USD
Entry Level:	1.8675
Position:	Sell
Prof-Loss:	-83 pips
Target:	-
Exit:	-

SaxoBank Analysis

MAJOR HEADLINES – PREVIOUS SESSION

EUR

Stronger than expected IFO figures, but lower than expected Import Prices this morning. German CPI figures have been coming out at a rather high level today. All in, the EUR might be supported short-term by data, but the market thinks the FOMC Statement will be more important tonight.

USD

Richmond Fed disappointed yesterday, but Core Inflation in the US has been uncomfortably high lately. Thus, we expect "no change" tonight, but also a Statement that is moderately hawkish and expressing concerns over the trend in core inflation figures.

JPY

Is there too much complacency in the use of JPY as a funding currency in Carry Trades? Watch out for the short end of the JPY yield curve. Last time it spiked higher, we saw a lot of turmoil in Emerging Markets and some jittery JPY trading (not really strength). We could soon see more rate speculation in Japan. The release of the Trade Balance this morning should not have any noticeable impact on JPY, but the FOMC Rate Announcement might result in some movements.

CHF

Still the European equivalent of JPY. The quite good figures lately have not been able to help CHF out of its bearish trend.

GBP

A strong come-back this morning - especially vs. AUD. Might go higher on that note. Note that GBPAUD broke the important 2.4650 level, which we still maintain in the FX Order Book (see below). The cross is in our opinion still a sell, but contigent of a break of 0.76 in AUDUSD.

CAD

There is a lot of noise in the market over a seemingly record high short position of CAD. We might be in for a short-squeeze, which would fit quite handsomely with the soft landing theme and further AUD strength.

AUD

Was the bullish trend in the AUD-crosses running into a brick-wall this morning? Perhaps 0.76 in AUDUSD is still capping the upside in other crosses. We are close to breaking that level and that might result in a blow-off in overnight trading.

NZD

Finally, looking like a real turnaround. The CPI figures were lower than expected o/n and we are now waiting for the RBNZ Rate Decision tonight. We expect no change like a big minority of analysts. Why? Because inflation has clearly come down from its rather elevated level in 2Q and because NZ policy makers are usually not keen to help the NZD going higher. Officials are more likely to come out and bad-mouth their own currency like they use to.