Tuesday April 19th, 2022

The US$ steadies, oil prices slip, equity markets are mixed, while US yields rise as risk-off sentiment continues. The US$ index hits its highest level (101.02) in 2-years, JPY drops to a fresh 20-year low vs US$, corn rallies towards 10-year highs as supply concerns, a hawkish Fed and Russia’s renewed campaign in eastern Ukraine impact currency & commodity markets. US yields firmed Monday after Fed President Bullard said that rate increases of 75 basis points, while not the base case shouldn’t be ruled out. The World Bank cut its forecast for global economic expansion in 2022 due to the Russian invasion of Ukraine. Intraday Ukraine updates, US Housing Start and Fed’s Evans speech will help provide currency markets direction today. In other news. President Biden will be holding a call with allies on Tuesday over Ukraine invasion. The US will no longer enforce mask mandate on airlines & trains after court ruling, while China sticks with its covid stance despite anger and increasing economic headwinds. The French PM says the outcome of the Presidential vote is not clear. Russia launches ‘battle of Donbas’ on the eastern front, Ukraine says. The currency markets. JPY hits 20-year lows vs US with Japan’s Finance Minister warning of risks from the yen’s ongoing weakness. The US$ hits 1-year high against CHF, GBP holds above 17-month lows and CNY drops to a fresh 2-month low vs US$. CNY drops 0.3% while Asian currencies are down 0.2% on average vs US$. Trading currencies are mixed with JPY & ZAR tumbling 1.1%, CHF & MXN fall 0.25%, NOK drops 0.1%, while NZD is up 0.1% and AUD strengthens 0.3% vs US$.

Oil prices dip 1% but remain near their highest levels since mid-March as investors remain worried over tight supply after Libya was forced to halt exports, China comes back online and ongoing concerns over further Russian sanctions. C$ holds on to its gains vs US$ heading into the CAD inflation data on Wednesday and supported by the overall strength of commodity prices. Data from the US CFTC on Friday showed speculators have raised there “long” C$ bets to their highest levels in a month. Expect the Loonie to remain volatile but our bias remains to see a stronger C$ into Q2. Support holds at 1.2560 if breached look for 1.2480 next, while resistance holds at 1.2655.

Euro slips below 1.08 amid risk aversion and ongoing Fed hawkish comments. The escalation in Russian attacks in Ukraine has increased investor risk aversion and a return to the safe-haven US$. Euro remains under pressure and looks set to retest its 2-year low set last week at 1.0757 with ongoing Fed hawkish comments continue with the interest rate divide is expected to continue to widen vs the ECB. Uncertainties in the French elections and the prospect of Russian oil sanctions will likely add further pressure on the Euro in coming days. Support holds at 1.0750, while resistance remains at 1.0840.

EURGBP is flat but remains on the back-foot holding near 2-year lows as interest rate differentials are expected to widen and pressure mounts as the Ukraine war escalates. Support resets at .8254 ( (1.2115) while resistance lowers to .8375 (1.1940).

GBP battles to hold above 1.3000 as markets focus on the BoE. Markets are focused on BoE’s next steps as the UK inflation sits at 30-year highs, and UK yields hit 7-year highs heading into BoE’s Governor Bailey’s speech on Thursday. The UK PM is expected to brush aside his ‘partygate’ fine when he faces parliament today, while opposition MP’s push for contempt inquiry. Expect the pound to trade within its current trading range ahead of BoE’s Baileys speech on Thursday. Support holds at 1.2980 while Resistance remains at 1.3050.