Friday December 9th, 2022

The US$ is flat, oil prices higher, equity markets rebound, while US yields ease ahead of US PPI report. Currency markets are stable while equity markets rise ahead of the US Producer Price Index which is one of the final pieces of data to inform policymakers ahead of the Fed’s rates decision next week. Investors are looking for signs of softness in prices that may allow global central bank policymakers to be less hawkish and more supportive of growth. US PPI (y/y) is expected ease in Nov to 7.4% vs 8% in Oct. As well as the US PPI, investors will also be focused on Michigan Consumer Sentiment Index, UoM 5-year Consumer Inflation Expectations to help provide intraday direction. In other news. US House passes $858bln defense bill with weapons funding for Taiwan. UK, Japan, and Italy agree to build joint advanced fighter jet. China’s disappearing data stokes fears of hidden covid wave (FT). Russia shells eastern front, Ukraine says, as war aims appear to shift. China, Saudi Arabia affirm importance of stable global oil markets. A Reuters poll expects ECB 50bps rate hike at its Dec 15th meeting. In Currency markets. The US$ index is flat, petro-currencies remain under selling pressure, while CNY retest 3-month highs and JPY strengthens in early trading. CNY firms 0.2%, while Asian currencies are mixed with KRW & SGD strengthened and MYR & THB weakened vs US$. Trading currencies are mixed with MXN weakens 0.6%, NOK down 0.3%, SEK dips 0.1%, while AUD is flat, NZD up 0.2%, and JPY firms 0.4% vs US$.

Oil prices steady in early trading but are headed for weekly loss over weak global economic outlook weighing on oil demand. C$ appears to be ending the week on a weaker note on an underlying weakness in oil prices and the potential of a widening interest rate differential between the BoC & Fed. BoC Kozicki said the bank will study the latest economic data to gauge whether to raise interest rates further. USMCA, Mexico & Canada won a trade dispute with the US over cars shipped across regional boarders, potentially giving manufacturers more incentive to make auto parts. Intraday US PPI, Mich Consumer Sentiment & CAD Capacity Utilization (Q3) will help provide market direction today. Support holds at 1.3570 while resistance remains at 1.3750 (Nov 4th).

EURCAD extends gains as oil prices remain under pressure and Euro finds support ahead of the ECB rate decision next week. Support holds at 1.4250 while resistance rises to 1.4400.

Euro opens on the higher end of its weekly trading range but remains capped at 1.0600. Investors have shifted their focus to next week’s ECB rate decision which is providing an underlying support to the Euro. A Reuters poll expects the ECB hike interest rates by 50bps to 2% on Dec 15th, despite the eurozone economy almost certainly being in recession, as it battles inflation running at 5x’s its target rate. Intraday US PPI will be the primary driver to markets today. Support holds at 1.0470 while resistance remains at 1.0600.

GBPEUR rebounds regaining lost ground as investors get set for the ECB & BoE rate decisions next week. Support holds at 1.1500 (.8695) while resistance remains at 1.1650 (.8583).

GBP holds above 1.2200 ahead of US PPI report. The pound holds steady heading into US economic data releases. The government set out 30 measures to overall the financial sector to exploit Brexit and ‘turbocharge’ growth. Next week BoE interest rate decision and Governor Baileys comments will be in focus for investors. Today US PPI will be the primary driver for market direction today. Support rises to 1.2180, while resistance resets to 1.2300.