September 20, 2019
September 20, 2019
The BOE’s main overnight rate Sonia , has not only experienced a reorganization since 2016 and in line with the ECB’s transition to negtive interet rates but the new order of the day for all central banks is not only to follow the ECB but all central banks are in transition to offer risk free interest rates. Best method to define a risk free interest rate is 1. to replace Libor and 2. A short term market trade able rate to trade alongside each central bank’s overnight rates.
The FED introduced SOFR and the ECB since October 2 offered STR, the Short Term Rate. Each central bank employs its interest rates according to its own market systems however not much real changes exists especially when interest rates are compared from central bank to central bank. The purpose is to not allow a central bank to gain exchange rate advantage from its competitor central banks.
An additional interest rate such as SOFR applied to DXY adds to a slower price speed and longer times in trading ranges and without breakouts. Today’s central bank meetings against an interest rate change or not only offers barely a 100 pip move and not necessarily in one direction. WTI as appled to USD interest rates moved 2 points in 4 months, from 55.00 to 57. As Central banks such as the BOE perfect new interest rate arrangements, all market prices will begin another slowdown to price speeds and market prices applies to commodities as well as stock markets. I warned to this affect long ago.
Today’s SOFR for example is 1.58 Vs Fed Funds 1.56 V Repo rate at 1.55. SOFR added to the mix employs as additional support or resistance point to exchange rate movements and hinders price breaks and price speeds.
The BOE’s Sonia stands at 0.71. From August 2018 -Nov 2019, Sonia ranged from 0.70 -0.71 and no movement. From 2014 to 2019, Sonia experienced 3 big moves: August 2016, Nov 2017 and August 2018. Sonia AUG 2016 traded from 0.45 -0.20 then November 2017 traded from 0.21 – 0.45. And November 2017 from 0.45 to 70, 0.71 where it remained to present day.
GBP/USD to target lower prices to 1.2600’s, then 1.2703 must break. Higher to target today’s 1.2912 must break 1.2879 and 1.2885. Long term, GBP/USD Targets 1.3300’s.
GBP/CHF at current 1.2700’s Vs GBP/USD at 1.2800’s holds solid supports at today’s 1.2482. GBP/CHF must trade lower in order for a drop to GBP/USD. Current GBP/CHF is overbought and heading lower. Long term target 1.2900′ and very close.
GBP/JPY. To move higher, Weekly 141.31 and 131.76 must break to target long term 143.00’s. Today;s lower target at 138.99 must break 139.42 and 139.24. At 140.29 and 140.38 should hold the ipside targets. GBP/JPY weeklies coincides to EUR/JPY to move higher at 123.85 and 124.94.
GBP/CAD Nothing exciting about GBP/CAD however 1.6881 downside Vs 1.6925 and 1.6936 to move higher to target 1.7077.
GBP/NZD Looking for a greater move back to 1.9900’s.
GBP/AUD is held solid at 1.8504 and a break targets 1.8378 while higher targets 1.8882.