Daily FX Wrap: Hawkish commentary from the BoE, as US CPI leads to more greenback buying

GBP was the main currency in focus; with market reaction initially choppy, disappointed by the 7 – 2 vote split. However, a hawkish skew from the BoE was digested in markets, as GBP bulls jumped on the statement that "A majority of the MPC judge that, if the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflation pressure then, some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainability to target (key addition)" Volatility was expected, in sterling, with large volume evident prior to the release.  

GBP/USD found a leg higher through 2017 highs, looking now at 1.34 and 1.3442 (September 2016) high next through that, as we do trade at the highs of the post Brexit 2016 range.  

EUR/GBP has not looked back since rejecting 0.93, with bears breaking through 0.90 into the decision. June’s high, alongside the November 2016 – July 2017 long-term range high will provide support, with bears looking to trade through 0.88 to re-find this range.

USD traders were awaiting their latest inflation figures; with the CPI report released post BoE today. A strong report across the board saw the USD gain ground, against its major pairs, with the exception of sterling, which was rampant, off the back of a hawkish BoE tone. EUR/USD now trades through 1.19 as this greenback recovery continues, however, a break of the long-term support line from April’s low, will be needed for a clear change of direction.

USD/JPY tested 111.00 through the data; running into stacked offers with sellers protecting August’s high. The risk tone continues in currency markets, with JPY and CHF buying slowing, evident in markets rebuffing reports out of The Nikkei supporting overnight rhetoric, as it was reported that North Korea is said to have showed signs of missile launch prep.

The SNB slightly altered their rhetoric in the unchanged Interest Rate decision today, removing the term ‘significantly overvalued’ and replacing with ‘remains highly valued’ and stated that they will remain active in FX market if necessary. EUR/CHF was choppy on the release of the decision, although still reaffirming their commitment to intervene in FX markets if necessary, saw the pair test August’s high, as FX risk appetite continues.

14 Sep 2017 - 15:31- ForexData- Source: RANsquawk

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