Uneasy Trucebe

Indices staged a partial recovery after an earlier drop in Asia. Aussie licks wounds ater worse than expected job fihures. Focus turns back to US jobs in the day ahead. GBP is the weakest ahead of the BoE decision at the top of the hour (more on this below). GBP shorts remain one of the Premium Insights’ existing trades.

The base case for the BoE decision is for ÂŁ100 bn in extra QE, with the GBP reaction likely to be shaped by the extent of the 9-person consensus at the MPC. Also look for hints on the likelihood of zero interest rates. The complexity will surface in the event of a smaller than expected consensus (such as 7-2 or 8-1) in which case GBP would try to rebound before the commentary/language takes over regarding the probability for for further rate cuts.

Ranges are narrowing and doji stars are appearing on more charts as market participants weigh the balance between easy money and the virus. Data was generally negative with US housing starts missing estimates and COVID-19 cases in US hotspots remaining elevated.

That was enough to sap some early optimism and send USD/JPY to a three-day low but the overall picture was of modest market moves and consolidation. Powell spoke in his second day of testimony and repeated his points about keeping policy easy but it was Atlanta Fed President Bostic who highlighted the crux of the problem. There is not a lot of historical precedent to predict a post-virus economy, he said.

The unease in markets has narrowed ranges but that won’t last for long. Looking ahead, the weekly initial jobless claims report is due on Thursday and expected to show another 1290K claims. The market is also watching continuing claims, which were at 20.93m last week and is expected to slip to 19.85m.

Ashraf Laidi
Ashraf Laidihttp://ashraflaidi.com/
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.

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