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GBP/CHF Surges on Diverging Price Pressures

FOREX
  • GBP is comfortably the strongest performer in G10, rising against all others on the back of the better-than-expected wages data from the UK this morning. Average weekly earnings rose at a clip of 5.8% for the 3m into December vs. Exp. 5.6%.
  • The release boosted Gilt yields across the curve, trimming the implied pricing for the BoE this year to ~77bps, from close to 85bps ahead of the release. Resultingly, GBP/USD has been bid up to 1.2656 - just above yesterday's highs to clear to the best levels since the bumper nonfarm payrolls release at the beginning of the month. The 50-dma cuts across as first resistance at 1.2677, the 50-dma today.
  • CHF is the poorest performer so far, slipping against all others as CPI came in soft relative to expectations (+1.3% Y/Y vs Exp. +1.7%). The release prompted an extension of recent EUR/CHF gains, putting the cross well through the mid-January highs and within range of key resistance at the 100-dma of 0.9496.
  • The USD is faring better, but price action is generally muted ahead of the US inflation release. As such, directional parameters for the USD Index are unchanged: 104.251 is the first upside intraday level ahead of 104.604, while 103.895 should act as first support.
  • Focus going forward is on the US CPI release for January, at which markets expect headline Y/Y CPI to slip to 2.9% from 3.4% previously, and to 3.7% from 3.9% for the core metric. Fed's Goolsbee will be the first post-CPI Fed speaker, followed by Barr later in the session. ECB's Cipollone & Nagel are also due as well as another appearance from BoE's Bailey, who also spoke after-market on Monday.
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