Tuesday November 16th, 2022

The US$ weakens, oil prices steady, equity markets are mixed, and US yields ease as war escalation fears ease. Currency & commodities rebounded after US President Biden said the missile was unlikely to have been fired by Russia. The US President’s comments knocked the JPY & US$ lower, while Euro & Polish Zloty strengthened as demand for safe-haven assets quickly faded. Today, focus shifts to US Retail Sales, Fed Williams Speech, Import & Export Price index and CAD Consumer Price Index which will offer clues on the state of the US & Canadian economies. In other news. UK inflation accelerates to 41-year high of 11.1% on soaring energy prices. Ukraine air defense may have fired missile that killed 2 in Poland (FT). Former President Trump officially launches his 2024 US Presidential bid. G20 Summit deplores war in Ukraine ‘in strongest terms.’ Sweden to deliver its biggest military aid package yet to Ukraine. Moody’s sees European power prices staying high. In Currency markets. JPY rebounds from 32-year lows on hopes of slower Fed rate hikes. Polish Zloty rallies 1.4% vs US$ after markets reassess risks. CNY off 2-month highs down 0.5%, while Asian currencies are flat on average vs US$. Trading currencies rebound with JPY flat, MXN firms 0.15%, AUD, ZAR & NZD up 0.4%, and CHF, SEK, & NOK strengthen 0.55% vs US$.

Oil prices steady after an incident involving a commercial vessel off the coast of Oman but rising covid cases in China continue to cap oil gains. C$ holds near to 2-month highs on the back of a weakening US$ as markets anticipates the Fed is close to pivoting its interest rate policy. Intraday the focus will be on CAD inflation report for clues if BoC could raise interest rates by 25 or 50 basis points at its next policy meeting on Dec 7th. Support holds at 1.3225, if breached look for 1.3152 (Sep15th) while resistance lowers to 1.3340.

EURCAD rebounds, retesting 8-month highs after markets stabilize after the Polish missile strike. Support holds at 1.3770 while resistance resets to 1.3860 if breached look for 1.3979 (March 31st).

Euro rebounds aggressively after Tuesday’s sell off on geopolitical tensions. Euro strengthens as markets unwind safe-haven buying after initial reports of the missile strike in Poland. Markets are refocusing on US Retail Sales after Tuesday’s softer-than-expected US PPI data which put the US$ under selling pressure. If we see a print of US Retail Sales at or lower than expected, we anticipate Euro extend its gains vs US$. Support holds at 1.0380 while resistance remains at 1.0500.

GBPEUR weakens as Euro rallies aggressively as geopolitical tensions ease. The GBP remains cautious ahead of Thursday’s UK budget announcement. Support remains at 1.1330 (.8826) while resistance holds at 1.1525 (.8677).

GBP steadies near 1.1900 after UK inflation topped expectations. The UK inflation data spiked to a 41-year high at 11.1% driven by surging household food & energy costs. The pound strengthened on the inflation news as markets speculate that the Bank of England will need to raise interest rates again. Finance Minister Jeremy Hunt, who is set to unveil tax hikes and spending cuts on Thursday, said “tough but necessary” decisions were required to tackle rising prices. Support resets to 1.1770, while resistance rises to 1.2000.