Friday August 19th, 2022

The US$ extends gains, oil prices dip, equity markets are down while US yields are up as risk-off sentiment grows. The US$ looks set to end the week on a high note while global equity markets ease after a chorus of Fed officials reiterate their resolve to hike interest rates, increasing expectations other major central banks will follow the Fed’s lead. Investors are now focusing on the Feds annual symposium at Jackson hole next week for further clues on their interest rate strategy. Today see’s no key US economic releases, in CAD Retail Sales will be in focus. In other news. UK consumer sentiment in August fell to its lowest level since 1974. Indonesian President said China’s Xi and Russia’s President Putin will be attending the G20 summit later this year. German producer prices jumps to highest rates since record began in 1949. China issues first national drought alert as the country battles to save crops. Britain faces ‘humanitarian crisis’ as energy costs soar, says health lobby. Strikes in the UK brings London’s transport network to a halt. Middle East states set for US$1.3tn oil windfall says IMF (FT). The currency markets. CNY slips to 3-month lows, Eur & GBP retest monthly lows and commodity currencies sell off as risk-off sentiment grows. CNY falls 0.3%, while Asian currencies are down 0.15% on average vs US$. Trading currencies continue under pressure AUD & CHF are down 0.2%, while JPY & NOK weaken 0.5%, and ZAR, NZD & MXN fall 0.65% vs US$.

Oil prices slid over 1% in early trading and are headed for weekly losses as recession fears cloud the demand outlook. C$ tests a fresh 4-week low as risk-off sentiment grows after a flurry of Fed policy makers continue to push the narrative of US higher rates in coming months. The loonie came under additional selling pressure as oil & commodity prices continue to slip. Focus will be on today’s CAD Retail Sales data which is expected to slip to 0.3% (MoM) from 2.2% in May. Support reset to 1.2895 while resistance rises to 1.3010.

Euro dips below 1.0100 amid ongoing US strengthening as safe-haven buying continues. Fears of a German recession, ongoing geopolitical concerns and hawkish fed comments are combining to add increasing pressure on the single currency. German producer prices jumped at the fastest pace on record in July which underscores the prospect of a German recession. German PPI a leading indicator for inflation surged 37.2% on the year, its biggest rise since records began in 1949, while month-on-month rose 5.3% was also the highest on record. With no major US economic releases today, we expect the US$ momentum to continue increasing the prospect of re-test of US/EUR parity. Support resets to 1.0000 while resistance lowers to 1.0130.

GBPEUR faces 2nd day of pressure as the pound slumps after consumer sentiment slips to near 5-decade lows. Support resets to 1.1730 (.8525) while resistance holds at 1.1950 (.8368).

GBP slips to fresh monthly lows amid increasing risk-off US$ buying. The combination of hawkish Fed comments supporting the US$ and increasing concern that the UK will slip into a recession as soon as Q3. British consumer sentiment in August fell to its lowest level since 1974 as households struggle with soaring coasts as inflation hit double digits. Domestically increasing strike action, ongoing political uncertainty and the growing energy crisis will continue to keep pressure on the pound in coming months. Support resets to 1.1800 while resistance lowers 1.1965.