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Greenback Weakens Further, JPY & GBP Strength in Spotlight

FOREX
  • Higher-than-expected US PPI data did little to affect post-CPI sentiment in currency markets, and a subsequent bounce for major equity indices weighed on the greenback into the week’s close. The USD index sits 0.3%, set to post its lowest close in around five weeks.
  • The Japanese Yen was once again in the spotlight, following the apparent confirmation that the BOJ intervened on Thursday, following the US inflation figures. Price action remained volatile in today’s session and another sudden jolt to the downside has prompted speculation that another round of intervention may have occurred.
  • USDJPY resides 0.58% lower on the session around 157.90, having tested the pullback low at 157.38. This level has held well, suggesting decent support layered at the Thurs/Friday lows. The 50-dma has been pierced, but a close below the mark at 157.78 today would be the first since March of this year.
  • For reference, according to a Bloomberg analysis of central bank accounts. Scale of intervention was probably around ¥3.5 trillion ($22 billion), based on a comparison of Bank of Japan accounts and money broker forecasts.
  • GBP strength into the London close has helped GBPUSD (+0.56%) again print the best levels since mid-'23. On the weekly chart, a close at current levels would be the first above the 200-week moving average since the false break last year, and would open M/T targets at 1.3142 - the 76.4% retracement for the Jun'21 (post COVID high) - Sep'22 (Truss budget low) downleg.
  • For EURGBP, weakness through the June low puts the cross at the lowest level since Aug'22. We note that this resumes the downtrend and places the immediate focus on 0.8366, the 2.236 projection of the Apr 23 - 30 - May 9 price swing.
  • On Monday, Fed Chair Powell makes his final scheduled appearance ahead of the pre-July FOMC meeting communications blackout period. Elsewhere next week, CPI data from Canada, New Zealand and the UK is scheduled, with Thursday marking the ECB’s July decision.
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