• EUR/GBP +0.44%, resistance at 0.8585 breached on dovish BoE remarks

• BoE's Ramsden "inflation risks now tilted to the downside" nL2N3GS1X3

• Pricing for first BoE cut shifts to Aug from Sep 0#BOEWATCH

• Still a risk of a June rate cut given two CPI prints before June meeting

• Close above 0.8585 would be a boost for bulls

• A break of the 200-DMA (0.8606) can spark fresh upside momentum

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Synopsis:

Credit Agricole suggests that recent verbal interventions by the European Central Bank (ECB), particularly comments by President Christine Lagarde, may provide short-term support to the EUR/USD exchange rate. However, the bank maintains a bearish stance on the currency pair over the medium to long term due to expected policy divergence between the ECB and the Federal Reserve.

Key Points:

• Recent Market Dynamics: The EUR/USD has shown some consolidation recently amid ongoing evaluations of potential policy divergences between the ECB and the Fed. This comes despite escalating geopolitical tensions in the Middle East that have negatively impacted global risk sentiment.

• Impact of ECB's Verbal Intervention: ECB President Christine Lagarde's recent remarks highlight concerns about the drop in EUR/USD and its potential to influence the Eurozone's monetary policy through its impact on imported inflation. These comments have been perceived as a form of verbal intervention aimed at stabilizing or propping up the EUR/USD in the near term.

• Medium to Long-Term Outlook: Despite the potential for short-term stabilization from ECB's verbal cues, Credit Agricole remains strategically bearish on EUR/USD. The expectation is that significant policy divergence between the ECB and the Fed will become more pronounced in the coming months, likely exerting downward pressure on the currency pair.

• Influence of External Factors: The bank also notes that external geopolitical developments and their influence on global markets could play a role in shaping the trajectory of EUR/USD moving forward.

Conclusion:

While the ECB's recent verbal intervention may provide some temporary relief to the EUR/USD, Credit Agricole advises caution, projecting that the currency pair will face downward pressures over the medium to long term due to diverging monetary policies between the Eurozone and the U.S.

• Despite Sterling's modest reprieve, 1.25 remains a stumbling block

• That said, a fleeting move below 1.24 is somewhat encouraging

• Skittish price action to be expected given Israel-Iran tensions

• Thus, ebb and flow of risk sentiment should dictate GBP/USD

• Unwind of initial equity weakness, underpinning for now

• BoE's Ramsden (hawkish) due to speak at 1515BST

• Although, cautious stance is likely given sticky wage growth/services CPI

• COMMENT-Beware hike talk from Fed's Williams nL2N3GR1S8

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Synopsis:

Bank of America (BofA) has updated its EUR/USD exchange rate forecast, reflecting a delay in anticipated Federal Reserve rate cuts following robust U.S. economic data. The bank now expects a gradual appreciation of the EUR against the USD, maintaining a long-term target of 1.20 by the end of 2025.

Key Points:

• Adjustment of EUR/USD Path: BofA has shifted its EUR/USD forecast slightly, extending the expected timeline for the pair's appreciation. The bank predicts the EUR/USD will stabilize at 1.07 in Q2—aligning with previous Q1 forecasts and near current spot levels—before appreciating to 1.10 in Q3 and 1.12 in Q4, revised down from earlier projections of 1.12 and 1.15, respectively.

• Long-term Outlook: The forecast for the end of 2025 remains unchanged at 1.20, assuming a convergence towards long-term equilibrium. This projection is underpinned by a gradual forecast profile and moderate USD appreciation this year, despite significant repricing in rates and unexpectedly strong U.S. data.

• Influence of ECB Policy: The European Central Bank's (ECB) anticipated rate cuts are already fully factored into current pricing. There exists a risk that the ECB may cut rates less than expected, which could influence the EUR/USD trajectory.

• Upside Risks to USD: Potential risks that could lead to a stronger USD include further delays in Fed rate cuts extending into the next year, which might push EUR/USD below 1.05 or even towards parity, particularly if the ECB proceeds with rate cuts amid heightened geopolitical tensions and rising energy prices.

• Global Inflation Concerns: There are also concerns that inflation might remain elevated globally due to tight labor markets, which could limit the extent of rate cuts globally and place downward pressure on the USD.

Conclusion:

Bank of America's revised forecast for the EUR/USD exchange rate reflects a cautious but gradually appreciating outlook for the euro against the dollar. The adjustments account for recent strong U.S. economic performances and a reevaluation of the Fed's monetary policy timeline. Investors should monitor further developments in U.S. economic indicators, Fed communications, and ECB actions, as these factors will be crucial in shaping the future movements of EUR/USD.

Synopsis:

ANZ provides a nuanced analysis of the GBP/USD pair, expressing a generally constructive outlook for the British pound in the near term, particularly against the EUR and CAD. However, challenges such as a weakening labor market and persistent inflationary pressures are expected to cap potential rallies in GBP/USD around 1.256 in the near term.

Key Points:

• UK CPI Analysis: Recent UK CPI data exceeded expectations, particularly in the services sector, which saw a slight uptick to 6% year-over-year. This increase, however, was largely driven by sectors like transport and communication within services, and housing, which are sensitive to energy and commodity prices, rather than a broad-based surge in services prices.

• Impact of Energy Prices: The contribution from higher energy costs underscores the CPI’s rebound, signaling that underlying services-specific price pressures may not be as robust as the headline number suggests.

• Service Sector Price Pressures: Service PMIs indicate that disinflation in service prices may be stalling, posing potential challenges if this trend continues in future data releases.

• Labor Market Concerns: The UK labor market is showing signs of strain, with unemployment rising to 4.2%. High wage demands, while inflationary, are also leading to a cautious hiring environment, as reflected in recent PMIs.

• GBP Outlook: In the short term, ANZ is optimistic about the GBP's performance against the EUR and CAD, attributing this partly to less favorable economic conditions in those regions compared to the UK. However, the firmer USD environment is likely to restrain GBP/USD gains, with ANZ setting a near-term cap for the pair at around 1.256.

Conclusion:

While ANZ remains somewhat positive about the British pound's near-term prospects against currencies like the EUR and CAD, expectations for GBP/USD are more restrained due to ongoing economic challenges and a strong USD. Key factors to watch include future service CPI data and labor market trends, which will significantly influence the GBP's trajectory.

• Will Japan will step in at some level to stop yen weakening further?

• Twenty-one out of 23 economists polled by Reuters said that they will

• Sixteen said they expected FX intervention if USD/JPY rises to 155

• Two chose 156, one said 157, and two chose 158 nL2N3GS0UQ

• Rare FX warning is helping to keep USD/JPY sub-155 nL2N3GR0LZ

• USD/JPY was last at 155 in 1990 (160 was approximate high that year)

• EUR/USD hardly changed by escalation of conflict in Middle-East

• Pair trades tight 1.0611-1.0662 range after Israel strike on Iran

• This year EUR/USD has done little regardless of any events

• In 2024 pair contained within an extremely tight 1.0601-1.1047 range

• Big rise in vols this week accompanied by modest 1.0690-1.0601 slide

• SNB may have effectively cornered EUR/USD market nL5N3GE1Z6

• An increasingly attractive dollar may rise further nL2N3GS0JP

Typo in headline

• Geopolitical tensions dictate as Israel launches attack on Iranian soil

• Risk aversion strengthens demand for safe-haven FX (USD, JPY, CHF)

• EUR/CHF -0.4%, overnight low = 0.9565, stopping short of 200DMA (0.9556)

• Now through pivotal support at 0.9680-85

• Daily close below could open the door to a bigger setback

• Given known risk, it will be prudent for traders to reduce exposure

• Thus, havens are likely to remain bid with sentiment under pressure

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• EUR/USD rallied to a 4-session high Thurs then turned lower

• Daily RSI diverged on the high and a daily inverted hammer formed

• Sharp drop to 1.0611 early Frid before recovering

• The daily signals reinforce the bearish monthly tech signals

• We offer by 1.0725: may have to lower as bull correction may fall short

• Weekly action now pivoting the 100WMA, 1.0630

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• More traders are buying options that would benefit/cover a USD/JPY setback

• JPY call/USD put spreads are proving popular over recent sessions

• They give holders the right to sell USD/JPY at one strike, buy at another

• Risk reversals show the implied vol premium for JPY puts over calls

• That's downside over upside strikes - 1-month expiry near long term high

• Intervention risk from 155.00 is high after trilateral statementon Thursday

• Israel's strike on Iran caused widespread option demand in Asia Friday

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• FX option strikes expire at 10-am Nw York/3-pm London - 19 April

• EUR/USD: 1.0570 (618M), 1.0600 (650M), 1.0635-45 (2.3BLN), 1.0675 (624M), 1.0700-10 (599M)

• GBP/USD: 1.2400 (400M) , 1.2470 (209M), 1.2520 (221M)

• EUR/GBP: 0.8530 (204M), 0.8550 (181M)

• AUD/USD: 0.6400 (466M), 0.6415-20 (1.4BLN), 0.6475 (442M)

• AUD/NZD: 1.0850 (216M), 1.1050 (300M)

• USD/CAD: 1.3700 (1.8BLN), 1.3750 (484M), 1.3775 (788M), 1.3820 (513M)

• USD/JPY: 154.25 (200M), 155.00 (2BLN)

• AUD/JPY: 100.00 (300M), 101.00 (375M)

For more click on FXBUZ

• Repeated failures in the high 1.24s into a Friday shake out

• Our 1.2415 long stopped at entry on-route to 1.2388 low

• A long lower shadow already formed and the low point might have been seen

• A May 5 1.2711-19 cloud twist now in play

• Negative daily momentum and RSI flat and o/s

• Weekly action remains inside its cloud, bearish

• However, we still lean bullish and have a bid in place

  For more click on FXBUZ

• AUD/USD recovering from deep plunge following reports of Israel retaliation nL2N3GS08K

• Risk assets staging minor recovery after Iran officials played down attacks nS8N3G2029

• E-minis were down 1.7% at one stage and now down around 1.0%

• AUD/USD traded as low at 0.6363 and is now trading around 0.6390

• Markets remain nervous as fears of escalation continue to spook investors

• Investors await clarification on extent of Israel action

• AUD/USD resistance around 0.6410/25 where it traded before the news

• For more click on FXBUZ

• Reports of missile explosions in Iran leading to heavy safe-haven flows nS0N3GP00K

• Gold up 1.0%. Oil up over 2.0% while E-minis -1.0% and US yields lower

• FX fear gauge, the AUD/JPY is down over 1.0% as risk gets slammed

• AUD/USD has broken below Tuesday's 0.6389 low t a 0.6369 low so far

• Minor support is at a Nov 10 pullback low at 0.6339

• The objective of current move lower is the Oct 26 low at 0.6271

• For more click on FXBUZ

• AUD/USD under pressure and below yesterday's 0.6416 low in early trading

• Asian investors spooked by hawkish Fed expectations as equity markets sink nL2N3GR25E

• Nikkei down 2.0%, Australia ASX down 1.0% and E-minis off 0.35%

• AUD/USD buyers tipped 0.6385/0.6400 with this week's low at 0.6389

• A break below 0.6385 doesn't find support until Oct 26 low at 0.6271

• AUD/USD trending lower with the 5, 10 & 21-day MAs in a bearish alignment

• Resistance is at the 10-day MA at 0.6485

• For more click on FXBUZ

• A touch softer after closing down 0.15%, with the U.S. dollar up 0.2%

• UK wage growth and services inflation too high for rate cut, BoE's Greene

• Most central banks are data-driven so major releases can change the outlook

• Tight range likely in Asia ahead of retail sales data early in London

• Charts; 5, 10 & 21-day moving averages plus 21-day Bollinger bands fall

• Daily momentum studies slip - daily charts retain the bearish bias

• Signals target 1.2369, 0.618% Oct-March rise, then the 1.2045 Oct 23 base

• Yesterday's 1.2484 high then Monday's 1.2498 high are initial resist

  For more click on FXBUZ

• Steady after closing -0.3%, as the USD firmed +0.2% with higher UST yields

• Charts - mixed daily momentum studies, 21-day Bollinger bands head lower

• Yield spreads widened, 10yr bund +2bp 2.493% and 10yr UST +6bp 4.647%

• The ECB is 'crystal clear' on a June rate cut, de Guindos - but then?

• Charts; 10 and 21-day moving averages fall with 21-day Bollinger bands

• Daily momentum studies show mixed signals - daily charts remain net bearish

• Close above the prior Feb 1.0695 low would be positive for next week

• 0.786 of the October-December rise proved resilient support this week

• 1.0645 905nln are the close significant strikes for April 19th

  For more click on FXBUZ

• AUD.USD opens -0.22% after USD reversed higher on hawkish Fed comments

• NY Fed President Williams was hawkish and US data was strong nAQN2IWSFRnL2N3GR1EU

• US yields moved higher on hawkish turn in Fed expectations nL2N3GR2MK

• AUD/USD traded as high as 0.6456 earlier when risk assets were buoyant

• Move up in US yields took shine of risk and Wall Street closed mixed nL2N3GR30M

• AUD/USD trending lower with the 5, 10 & 21-day MAs in bearish alignment

• Resistance is at 10-day MA at 0.6486 and break would suggest bottom forming

• Buyers are tipped 0.6380/0.6400 with support at Oct 26 low at 0.6271

• Key in Asia will be moves in the USD/CNH and Asian equity markets

• For more click on FXBUZ

Synopsis:

Nomura has updated its forecast for the Bank of England’s (BoE) monetary policy following recent UK economic data that showed unexpectedly high services inflation and wage growth. While still predicting a rate cut in August, the pace of subsequent cuts is expected to slow, reflecting persistent inflationary pressures. This revised outlook indicates a greater policy divergence between the BoE and the European Central Bank (ECB), potentially influencing EUR/GBP exchange rates.

Key Points:

• Unexpected Inflation and Wage Data: UK services inflation reached 6% in March, surpassing expectations set by Nomura, the BoE, and consensus forecasts. This development, combined with recent data showing accelerated wage growth, underscores persistent inflationary pressures within the UK economy.

• Revised BoE Rate Cut Forecast: Nomura maintains its prediction of a 25 basis point rate cut by the BoE in August but has adjusted its longer-term forecast. The firm now anticipates that the BoE will implement rate cuts every other meeting, aiming for a Bank Rate of 3.75% by the end of 2025, indicating a slower pace of monetary easing than previously anticipated.

• Comparison with ECB Policy: The revised forecast highlights a clearer divergence in monetary policy between the BoE and the ECB, especially in contrast to the Federal Reserve’s policies. This divergence could potentially exert more downward pressure on the EUR/GBP pair.

• Potential Impact on EUR/GBP: Nomura suggests that the distinct paths of monetary policy adjustment between the BoE and the ECB might lead to increased downward pressure on the EUR/GBP exchange rate, as the markets adjust to these expectations.

Conclusion:

Nomura’s adjustment of its BoE rate cut forecast reflects a cautious approach to monetary easing amid persistent inflation and wage growth in the UK. The expected policy divergence with the ECB could influence the EUR/GBP exchange rate, potentially favoring the pound in the medium term.

• USD/JPY uptrend consolidated for a second day below Tues's 154.79 peak

• Also the second day trading inside Tuesday's 153.90-4.79 range

• Daily RSIs slightly less O/B, but still high at 79

• May take more consolidation to reset and let MAs catch up with prices

• 155 remains the key psychological hurdle

• With M-T 161.8% Fibo targets by 155.20

• Not much above there until 2024's up-channel top at 156.64.

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• USD/JPY is back up by this week's 154.79 highs as Tsy ylds rebounded

• The dips in Tsy ylds and USD/JPY from Tuesday's peaks were corrective

• Hawkish Philly Fed, Fed's Williams and still low claims lifted the dollar

• USD/JPY rise comes after Wed's US, Japan, S. Korea FinMin FX talks

• That after weeks of MoF and BoJ warnings about excessive FX moves

• Market worried 155 is the BoJ's new yen defense line

• Lots of expiries at 155, talk of barriers there, stops above it

• Vols and risk-reward show less hedging against a sudden bearish reversal

• Japan CPI due out on Friday is unlikely to bolster case for more BoJ hikes

• Main USD/JPY driver remains the Fed and Treasury yields

• Above 155 are twin 161.8% Fibos by 155.20 from key 2023 lows

• Might need well below-f/c Japan CPIs to eye 2024's channel top at 156.64

• That and the BoJ refraining from intervention for now

• If they do intervene, nearby props are by 153, 152 and 151

• Worst case is a dive to the weekly cloud top & up TL from 2023's lows by 145

For more click on FXBUZ

• NY opened near 1.0675 after 1.0690 traded on EBS in Europe's morning

• US yieldsUS10YT=RR gained, spreadsUS2DE2=RR widened on Philly Fed report

• Pricing component of Philly Fed fueled concern inflation is rising again

• US$ rallied on the prospect that Fed rate cuts will be delayed

• USD/CNH rallied above 7.2535 & equities ESv1 gave up earlier gains

• EUR/USD turned lower, hit 1.06433 late, traded down -0.28% in NY's afternoon

• Daily techs warn longs, RSI diverged on the high, inverted hammer formed

• Fed's Goolsbee scheduled to speak Friday, may impact risk sentiment

• For more click on FXBUZ

Synopsis:

ING evaluates the potential for a large-scale, coordinated intervention in Asian foreign exchange markets in response to the recent surge in the USD. With the Japanese yen and Korean won experiencing significant depreciation, finance ministers from Japan, Korea, and the US have expressed serious concerns, suggesting a heightened readiness for intervention to stabilize these currencies.

Key Points:

• USD/Asia Dynamics: The strong March CPI and retail sales data in the US have significantly influenced USD strength, impacting Asian currencies. While the PBOC has maintained stable USD/CNY fixings above 7.10, the broader question of potential renminbi depreciation remains open.

• Regional Currency Weakness: The Japanese yen and Korean won have notably weakened, leading to increased vocal concerns from respective finance ministries. Recent discussions, including a trilateral meeting with the US, have focused on this issue, highlighting the seriousness of the currency depreciations.

• Historical Context of Interventions: The Bank of Japan and Bank of Korea have previously intervened in the FX markets to stabilize their currencies, with substantial amounts being spent to curb volatility. The BoJ's intervention in 2022 involved selling approximately $70 billion, while the BoK's quarterly interventions ranged between $2 billion and $6 billion last year.

• Prospect of Coordinated Intervention: The recent trilateral meeting raises the possibility of simultaneous interventions by Japan and Korea if USD/JPY and USD/KRW continue to trade at high levels in a disorderly manner. This coordination could be a strategic move to mitigate further depreciation against the dollar.

• Global and Domestic Factors: External pressures such as Federal Reserve rate hike expectations and geopolitical tensions in the Middle East also contribute to the strong demand for the dollar, complicating the effectiveness of potential FX interventions.

Conclusion:

While coordinated intervention by Japan and Korea could temporarily stem the tide of their currencies' depreciation against the dollar, a true reversal in trends may require significant shifts in global economic conditions.

EUR/USD turned lower Thursday after striking a four-session high, and the pair's corrective rally may be finished as U.S. data appears to be delaying Fed rate cuts and bearish technical signals emerge.

April Philly Fed business conditions came in at 15.5, which was well above estimates of 2.3 and also above March's 3.2 result.
The prices paid component spiked up to 23.0 from 3.7 in March.

The pricing data fueled concerns inflation is running hot again in the U.S.

U.S.
yields rallied with the 2-year US2YT=RR approaching the psychological 5.0% level.

German-U.S.
yield spreads US2DE2=RR reversed earlier tightening and widened, increasing as the dollar's yield advantage over the euro.

Fed rate-cut expectations are being pushed back by investors and analysts as a result of recent U.S. pricing reports.

The latest Reuters survey of economists indicated the first Fed cut will come in September compared a June cut, which was indicated in the March survey.

Technical signals suggest downside risks are growing.

Daily RSI diverged on the four-session high and a daily inverted hammer formed.
Those signals emerged after EUR/USD neared key short-term resistance in the 1.0690/1.0700 area.

The fresh bearish daily signals reinforce already bearish monthly signals.

EUR/USD still seems set to test 1.0450/1.0500.

For more click on FXBUZ