Friday April 22nd, 2022

The US$ rallies, oil prices fall, equity markets are down, while US yields rally following hawkish Fed comments. Fed Chair Powell at the IMF spring meeting on Thursday said taming inflation ‘absolutely essential’, acknowledged a 50 basis points hike possible in May and noted that the US labor market was very tight. Intraday ECB President Lagarde & BoE Governor Bailey will deliver speeches at the IMF spring meeting, CAD Retail Sales, and US PMI data will help provide direction to currency markets today. In other news. In Ukraine Putin claims ‘liberation of Mariupol’, while Ukraine rejects ‘premature’ declaration of victory and the US says the fight for control of the city continues. Treasury Secretary Yellen calls for EU caution on Russian energy ban, warning a full EU import embargo on Moscow would dent global growth. In France the latest polls for the shows President Macron leads Le Pen ahead of the run-off vote on Sunday. UK retail sales fall sharply to the weakest level since 2020 as inflation impacts consumers. The currency markets. The US$ rallies to fresh 2-year highs, GBP drops to 2020 lows, CNY extends losses, set for worst week since 2019 & JPY holds near 20-year lows vs US$ as record-level risk aversion hits Japan credit. CNY falls 0.65%, while Asian currencies are flat on average. Trading currencies are under pressure as ZAR tumbles 1.2% today (6.7% mtd), while NZD & AUD fall 0.95%, NOK & MXN weaken 0.85%, CHF slips 0.2% and JPY is down 0.05% vs US$.

Oil prices fall 2% on the prospect of weaker global growth, higher global interest rates and ongoing covid lockdowns in China impacting demand even as the EU considers a ban on Russian oil. C$ volatility continues as the loonie weakens over 200 basis points vs US$ from Thursday on the back of the hawkish Fed comments and falling oil prices. Our bias remains to sell US$ on rallies, domestically the CAD economy remains strong, Cad yields are higher, and markets expect further aggressive BoC rate hikes in 2022. Intraday key CAD Retail Sales & US PMI will help provide intraday direction. Support resets to 1.2585, while resistance rises to 1.2698.

Euro came under fresh selling pressure, dipping below 1.0800 amid risk aversion on global growth concerns. Euro made a sharp U-turn on Thursday after testing it highest levels in over a week at 1.0937 after the US Fed chairs comments. Domestically Eurozone private sector business activity expanded in April, but the Ukraine war, uncertainty in the French elections and the Feds hawkish comments on interest rates has investors switching back to the safe-haven US$. Markets will focus on US S&P Global PMI and ECB President Lagarde’s speech for intraday direction. Support drops to 1.0785, while resistance resets to 1.0860.

EURGBP rallies almost 1% as the pound is rocked by weaker-than-expected March UK retail sales. Support resets at .8300 (1.2048) while resistance lowers to .8400 (1.1905).

GBP falls below 1.29, falling over 1% to its lowest level since 2020 vs US$. March UK Retail Sales YoY was expected at 2.8% vs previous 7.2%, but markets were surprised to see Retail Sales drop below expectations to 0.9%, its weakest level since November 2020. Intraday markets will be focused on BoE Governor Bailey’s comments at the IMF spring meeting, after commenting on Thursday that the UK’s inflation shock had more in common with the eurozone vs the US. Support resets to 1.2840 while Resistance calls to 1.2950