• Not a smooth move lower but the bias remains bearish

• Wednesday long lower candle shadow hinted at supply fade

• Early Thursday action tight within a 1.2490-01 range

• Initial support at 1.2467, May 1 low

• Bears can target a 50% Fibo level at 1.2434, off 1.2299-1.2569

• Fourteen day momentum yet to confirm price drop but RSI pointing down

• We lean bearish but wait for stronger signals

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• Steady in a tight 1.0742-1.0751 EBS range in a low-key FX session in Asia

• German and French bank holidays, so likely quiet into the BoE rate decision

• EUR/GBP flows may lead EUR after the decision - expecting a dovish hold

• Charts- neutral 5, 10, and 21-day moving averages, momentum studies conflict

• 21-day Bollinger bands expand - bounce stalled awaiting the next trigger

• 1.0790 upper 21-day Bolliger band and last week's 1.0812 high key resistance

• Friday's 1.0724 base and last Thursday's 1.0675 low are initial supports

• 1.0750/55 1.242 BLN and 1.0760 1.003 BLN are the close strikes for May 9th

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Synopsis:

ING predicts that the upcoming Bank of England (BoE) meeting will not significantly weaken the GBP, despite the current bearish positioning ahead of the event. The EUR/GBP rate has shown resilience early this week, influenced by recent US monetary policy events.

Key Points:

• EUR/GBP Resilience: The pair has maintained levels above 0.8600, finding support from shifts in the EUR:GBP short-term rate differential post-US monetary developments.
• Sensitivity to Fed Pricing: The sterling curve shows more sensitivity to Federal Reserve movements than to those of the European Central Bank, influencing the current market stance on GBP.
• BoE Meeting Expectations: While the market has adopted a bearish view on GBP due to external factors, ING does not foresee the BoE's upcoming decision causing further significant weakening of GBP.

Conclusion:

ING suggests that the GBP's response to the BoE meeting may be subdued, with limited additional weakening expected. The bank advises keeping an eye on the EUR/GBP pair as it navigates through central bank influences from both the Fed and the BoE.

• AUD/USD consolidates in a narrow but well supported 0.6569-0.6583 range

• Steadies as bargain hunters emerge after 1.35% drop from Fri 0.6650 high

• Likely to stay bid on dips as traders mull higher-for-longer RBA rate stance

• RBA's more hawkish stand contrasts with easing bias of most other DM c.banks

• AUD/JPY sought on dips despite Japan's verbal warnings on JPY

• Supports 0.6560 and 0.6541, the 38.2% Fibo retracement of April-May rally

• Resistance 0.6600-05, 0.6625-30, 0.6645-50; China trade dataawaited

• For more click on FXBUZ

• Off 0.05% early after closing down 0.1% with the USD up 0.1%

• Charts; 5, 10 & 21-day moving averages plus daily momentum studies conflict

• The Bank of England rate decision will likely leave GBP sidelined in Asia

• Rates on hold with a cautious but more dovish tone is expected from the BoE

• 5, 10 & 21-day moving averages slip - as 21-day Bollinger bands edge lower

• Daily momentum studies show mixed signals - charts turn net negative

• Resistance starts at Tuesday's 1.2568 top then at Friday's 1.2634 high

• 1.2466/67 0.5% of April/May rise and last week's base are initial support

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• Steady early, closed down 0.1% with the USD up 0.1% - likely low-key in Asia

• Yield spreads a touch tighter, 10yr bund +4bp 2.460%, 10yr UST +3bp 4.492%

• ECB can cut rates in June but should rethink how it sets policy - Wunsch

• Current ECB models miss large economic shifts, struggle with extreme events

• Charts - neutral 5, 10, and 21-day moving averages, mixed momentum studies

• Horizontal 21-day Bollinger bands - bounce still stalled, no strong bias

• 1.0790 upper 21-day Bolli band and last week's 1.0812 high key resistance

• Friday's 1.0724 base and last Thursday's 1.0675 low are initial supports

• 1.0750/55 1.242BLn and 1.0760 1.003BLN are the close strikes for May 9th

  For more click on FXBUZ

• AUD/USD cautiously bid Thu as traders mull higher-for-longer RBA rate stance

• RBA rate expectations diverge from those of other major c.banks, supports

• Markets now do not expect a RBA rate cut until April next year

• Fed rate cut chances in Sep at 66%, BOE cut priced in for Sep, ECB in June

• Bargain hunters emerge after 1.35% drop from Fri 0.6650 high

• Supports 0.6560 and 0.6541, the 38.2% Fibo retracement of April-May rally

• Resistance 0.6600-05, 0.6625-30, 0.6645-50; Wed range 0.6599-0.6558

• AUD/JPY moves and China trade data key for direction in Asia

• For more click on FXBUZ

Synopsis:

Danske Bank anticipates a rise in the EUR/GBP exchange rate following the upcoming Bank of England (BoE) meeting. Expected dovish adjustments in the BoE's stance and communication could influence market perceptions and currency valuations.

Key Points:

• Unchanged Bank Rate: Danske predicts the BoE will maintain the Bank Rate at 5.25%, with a voting split of 7-2, aligning with market consensus.
• Dovish Shift: Expectations lean towards a dovish pivot, with potential signals from the BoE about the commencement of a rate-cutting cycle, likely starting with a 25 basis point cut in June.
• Inflation Forecast Revision: The BoE may adjust its medium-term inflation forecasts downward, which could further support a dovish outlook.
• Market Impact: Such dovish developments are expected to weaken GBP against EUR, leading to an increase in the EUR/GBP rate by the day's end.

Conclusion:

Danske forecasts a higher EUR/GBP exchange rate as a result of the BoE meeting, driven by anticipated dovish shifts in monetary policy outlook and inflation expectations.

The dollar index rose 0.15%, with EUR/USD down 0.1%, hovering above Wednesday's lows that erased the rally triggered by Friday's quite dovish U.S. data, as the focus shifts to the May 15 CPI and retail sales reports, and as the yen continued to slide broadly.

EUR/USD only briefly recovered from Wednesday's 1.0735 low by the 50% Fibo of last week's rally and other nearby supports, moving in line with bund-Treasury yields spreads.

The dollar was broadly higher earlier in the day as its Treasury yield-led drop following Friday's dovish U.S. jobs and ISM reports came in for a further correction, except against the yield-bereft yen.

The durability of that correction will next be tested by the May 15 CPI and retail sales data.
Presently, the Fed is priced to likely cut rates in September and December, while the ECB is expected to begin easing next month, with three cuts by year-end.

Those Fed and ECB market outlooks haven't been influenced much by this week's second-tier economic data or Fed speakers, though Federal Reserve Governor Lisa Cook's fairly sanguine comments regarding the financial shape of households, banks and firms may have aided a late firming of Treasury yields and the dollar.

The Riksbank rate cut on Wednesday followed the SNB's recent move and is seen setting the stage for the ECB to also ease.
The pace of easing in Europe will be governed to some extent by the pace of Fed cuts, because too much policy divergence could cause dollar gains and European import price inflation.

USD/JPY rose 0.58%, extending its recovery from last week's 160.245-151.86 dive on suspected MoF interventions, culminated with Friday's weak U.S. data.
Prices are now nearing the mid-point of that plunge at 156.05.

There is some concern that the yen will be propped up again if it falls toward last week's peak, but the 20bp of further BoJ rate hikes priced in by year-end hasn't shifted amid hints the BoJ might have to carry more of the yen supporting load for the MoF.

Sterling fell 0.1% on the approach to Thursday's BoE meeting that is widely expected to leave rates unchanged.
The focus will be on whether there are more votes for rate cuts, and from whom.

Markets currently fully price in a first BoE rate cut in August and one more before year-end.

Wednesday's 1.2469 sterling low nearly retraced 50% of the April-May 1.2299-634 rebound that faltered between the 100- and 200-day moving averages, as Gilts-Treasury yield spreads bearishly diverged from Friday's high, and gains linked to risk-on flow faltered this week.

Aussie fell 0.33%, extending its pullback from May, April and March highs near 0.6650, the reciprocal of which is 1.5, this week after another RBA hold and softer Australian retail sales.

U.S.
jobless claims on Thursday will get a look as a nearly real-time gauge of the labor market, the condition of which appeared to cool in last week's payrolls and JOLTS reports.

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• USD/JPY rose 0.58% as MoF, BoJ yen support efforts continued to fail

• Japan's MoF and BoJ continue to lean against the yen's weakness

• But even with dovish US data on Friday, USD/JPY quickly rebounded

• And did so after finding support by 2023/22 peaks near 152

• Prices now nearing 50% of last week's collapse, April 30 low at 156.05/08

• Big drops in Tsy-JGB ylds spreads appear to have bottomed out

• Those spreads remain attractive as is low-yield yen as a funding currency

• Focus beyond possible intervention risk is US CPI, sales data May 15

• Wed's Fed speakers supported Treasury yields and the dollar

For more click on FXBUZ

• AUD$ extends weakness, -0.3% at 0.6577; Wednesday range 0.6599-0.6558

• More-dovish Fed rate expectations ebb, dovish RBA hold stirs selling

• AUD/USD reprieve with slide halted by 200-HMA nL1N3HB1IF

• Long AU yields lower this week, as is copper HGv1 -1.3% aids AUD decline

• Relative rates in AUD favor; IRPR shows RBA on hold, Fed -44bp into YE '24

• Focus for now remains on When US will begin to cut; Sept cut at 80% odds

• AUD$ supt at Wednesday's cloud twist by 0.6555, 55-DMa at 0.6537

• Res 100-DMA at 0.6580, 0.6599 Wed high, 0.6650 upper 30-d Bolli/May 3 high

• Bulls in control abv 0.6506, 50% of 0.6363-0.6650

• For more click on FXBUZ

Synopsis:

TD examines the current state of the FX market, describing it as delicately balanced between order and chaos following recent Federal Reserve actions and Non-Farm Payroll data. The market's focus is increasingly on inflation trends, which have become a significant driver beyond the traditional growth metrics that typically influence currency movements.

Key Points:

• Market Dynamics: Post-Fed meeting and labor market data have brought some stability, yet the potential for disruption remains as political and economic uncertainties loom.
• Data Dependence: The immediate future of the FX market appears heavily dependent on incoming economic data, with inflation taking center stage.
• USD Positioning: The US dollar is currently trading at a premium, with positioning stretched, suggesting that any shifts in macroeconomic signals could lead to significant market movements.
• Strategy Outlook: Despite potential volatility, TD views dips in USD strength as opportunities for buying, given a macroeconomic environment that favors the US dollar.

Conclusion:

While the FX market currently exhibits a semblance of order, underlying factors suggest potential for sudden shifts towards chaos, driven by economic data and geopolitical developments. Investors are advised to remain vigilant, focusing on inflation indicators and technical analysis to navigate the uncertain terrain ahead. This approach will be crucial as global markets continue to digest shifts in US economic policy and broader geopolitical risks.

Sterling weakness extended in early NorAm trading as the pound matched a one-week low at 1.2467 amid position adjustments ahead of Thursday's BoE rate vote and presser that appears to carry dovish risks that could put further pressure on the pound.

The BoE is almost unanimously expected to hold rates steady on Thursday, as indicated on LSEG's IRPR page.
As such traders will focus on the vote tally before turning attention to U.S. CPI May 15 and UK CPI data on May 22.

Should other BoE governors join Swati Dhingra voting for a 25bp rate cut, market expectations for a June cut are likely to rise from current odds near 50% and would likely send GBP/USD tumbling toward support at the April 24 low 1.2423 and perhaps the April 22 2024 low at 1.2299.

No doubt BoE members, like Fed members, are likely to tout successes bringing down inflation and their resolve to continue pushing it to target.

Should the vote or post-decision comments be perceived as dovish, traders may not wait for CPI data later in the month to crater GBP/USD.

For more click on FXBUZ

Synopsis:

Bank of America outlines its expectations for the upcoming Bank of England (BoE) meeting, predicting a steady approach with no change in the Bank Rate. The meeting is likely to signal a cautious shift towards rate cuts in the future, possibly beginning as early as June.

Key Points:

• Interest Rate Decision: The BoE is expected to maintain the current Bank Rate, with a majority of members favoring the status quo, but signs of dissent could emerge, hinting at future rate cuts.
• Monetary Policy Outlook: Current guidance stating that "monetary policy would need to be sufficiently restrictive for sufficiently long" is anticipated to persist, yet the minutes may show a gradual shift towards easing.
• Inflation and Economic Forecasts: Updated forecasts might show inflation trending slightly below target by 2026, which could justify upcoming rate reductions. 
• GBP Sensitivity to Rate Decisions: The British pound's performance remains closely tied to rate differentials and central bank actions. Current market pricing suggests a nearly 50% chance of a June rate cut, which could significantly influence GBP movements.

Conclusion:

The outcome of the BoE's meeting is poised to play a crucial role in GBP dynamics. With the market pricing in almost a 50% chance of a rate cut in June, any dovish signals from the BoE could significantly impact GBP valuation

• EUR/USD flat, low vol backdrop prompts narrow range (1.0735-57)

• 200-DMA (1.0795) remains a stumbling block. Break would entice bulls

• Abundance of EUR/USD option expiries around 1.0750 may have a pinning effect

• Thus, the pair may continue to trade close to current levels

• Slew of Fed speakers (Jefferson, Collins, Cook) unlikely to move the needle

• Narrative vacuum until U.S. CPI (May 15) can see tight ranges hold

• EUR/USD also fairly valued relative to EZ/US yield spreads

For more click on FXBUZ

Synopsis:

Goldman Sachs has revised its forecasts for GBP/USD downwards, indicating a less optimistic outlook for Sterling in the context of the upcoming Bank of England (BoE) meeting and recent market trends.

Key Points:

• Bearish Sentiment: Recent remarks from Deputy Governor Ramsden suggesting that inflation risks are tilted to the downside have contributed to a more bearish sentiment among clients.
• Revised Forecasts: Goldman now expects GBP/USD to be at 1.24 in the short (3 months) and medium term (6 months), adjusting downwards from previous forecasts. The 12-month forecast has also been adjusted to 1.28 from 1.35.
• Pro-Cyclical Backdrop: Changes in hawkish policy repricing in markets have made the pro-cyclical backdrop less supportive for GBP, placing Sterling in a challenging position.

Conclusion:

Goldman Sachs’ updated forecasts reflect a cautious stance on GBP/USD, driven by evolving risks to inflation and recent shifts in market dynamics

Synopsis:

Credit Agricole emphasizes the continued attractiveness of the USD for near-term investment, highlighting its strong fundamental qualities compared to other G10 currencies.

Key Points:

• Strong Fundamentals: The USD's appeal is supported by high nominal and real carry, superior growth prospects, and robust liquidity.
• Buy on Dips Strategy: Given the current stall in the USD rally, Credit Agricole advises buying on dips, suggesting the currency will likely recover as market corrections subside.
• Market Watch: With a light US data calendar this week, Fedspeak will be closely monitored for insights into the Federal Reserve's policy outlook and its impact on USD valuation.

Conclusion:

Credit Agricole projects that the USD will regain momentum following a brief period of correction, backed by its superior economic fundamentals

Adds link to CPI risk premium on last line

• FX option traders report many sub 1-week expiry EUR/USD 1.0750 strike trades

• It's the current spot rate and would suggest market is long gamma nearby

• An abundance of existing strikes nearby can indicate long gamma positioning

• DTCC traded options data does show some very big strikes due to expire soon

• Largest on Monday between 1.0745-55 on 5-billion euros

• 1-billion euros each expire 1.0750 on Tues, Wed and Thurs next week

• Before those - 1-billion 1.0750 expire today and 2.1-billion 1.0745-60 Thurs

• Options price volatility risk for US CPI - may be little to inspire FX prior

For more click on FXBUZ

• EUR/USD has traded tight ranges for 17-months

• Last year's range was one of the tightest on record

• This year's range is smaller

• Interest rates matter more when it's quiet

• The interest rate differential weighing EUR/USD has widened this year

• Selling strength to bank carry with limited FX risk may become more popular

• Ranges that have unfolded mostly within 1.05-1.10 may drop

• The 200-DMA at 1.0795 may help to define peak of a lower range

• AUD/USD tests 0.6565 (May 3 low) after extending south from 0.6649

• 0.6649 was Tuesday's high, before RBA maintained neutral stance on rates

• Lower iron ore prices weigh on AUD (iron ore is big export earner for Oz)

• Support points below 0.6565 include 0.6558, 50% retracement of 0.6466-0.6650

• 0.6466 was last week's low (May 1, before relatively dovish Powell hurt USD)

• Australia's PSC to be bought by UK's Ardonagh in A$2.26 billion deal

• Cable extends south to threaten 1.2467 following Riksbank rate reduction

• 1.2467 was last week's low. It is also 50% retracement of 1.2299-1.2634

• Riksbank rate reduction is boost for doves advocating BoE rate cut in June

• Two of the nine Times Shadow MPC members want BoE to cut rates this week

• Ramsden may join Dhingra in voting for cut on Thursday. 5-4 for cut in June?

• GBP/USD support points below 1.2467 include 1.2450 and 1.2427 (61.8% Fibo)

• EUR/USD failed to register a daily close under the 1.0611 Fibo in April

• 1.0611 Fibo is a 76.4% retrace of the 1.0448-1.1139 (Oct-Dec) EBS rise

• 14-day momentum has recently turned positive, highlighting the shift in bias

• A break and daily close above the Ichimoku cloud would be quite bullish

• The daily cloud currently spans the 1.0824-1.0838 region

• EUR/USD Trader TGM2334. Previous update nL1N3HA0HX

• Expectation of dovish BoE rate hold Thursday is weighing on the pound

• 1.2484 was cable low in Asia, lowest level since May 2 (1.2634 = May 3 high)

• Two of the nine Times shadow MPC members advocate BoE rate cut Tuesday

• Nine out of 29 economists polled by Reuters expect 2 votes for cut Thursday

• Ramsden most likely to join Dhingra in voting for cut. 5-4 for cut in June?

• 1.2530 (May 3 low) is now a GBP/USD resistance level. 1.2500 expiry today

• Had seen bearish risk Tues and market has slipped lower

• GBP/USD long upper candle shadows highlight demand fade nL1N3HA0I4

• A bearish engulfing line Tues and GBP set for back to back down days

• The reversal signal will need confirmation

• A 38.2% Fibo off 1.2299-1.2569 provides a bear target at 1.2466

• The Fibo close to the 1.2467 May 1 low point

• Key 50% retracement is 1.2434, a break here could cement the new bear trend

• We will look for an opportunity to get short for drop under 1.2400

  For more click on FXBUZ