Friday December 17th, 2021

The US$ is steady, oil prices fall, equity markets and US yields are mixed as risk mood eases. Currency markets retreat, the US$ index rebounded above 96.00 as markets refocus on the global surge of the Omicron variant and geopolitical uncertainties. Intraday there are no high-tier macroeconomic data releases from the US, expect markets to consolidate after a busy week of central bank policy announcements and risk-on sentiment eases. In other news. Tensions continue as Russia proposes US deny NATO membership to Ex-Soviet States, while EU leaders agree on new sanctions with the US if Russia invades Ukraine. Democrats drop year-end push on President Biden economic plan amid discord. Covid. US President Biden warns of a winter of ‘Illness, ‘Death’ for the unvaccinated due to Omicron. CDC recommends Pfizer, Moderna vaccines over J&J shots for adults due to rare blood clot cases. Scientists are rewriting their expectations for the covid pandemic in 2022 as the Omicron variant gains momentum in Europe & the US. UK covid cases hit record highs for a second day. In currency markets. The GBP eases off 2-months after the BoE rate hike, CNY is flat as Beijing seeks to slow its rise and Turkish Lira crisis deepens after the latest rate cut testing 16.54 vs US$. CNY weakens 0.2% while Asian currencies are flat on average vs US$. Trading currencies are mixed JPY & ZAR are up 0.2% while MXN is flat, NOK & AUD weaken 0.35% and NZD falls 0.55% vs US$.

Oil prices drop over 1% heading for a weekly loss as surging Omicron cases raises concerns over new curbs that may impact fuel demand. In the bigger picture Goldman Sachs analysts says they can’t rule out oil at US$ 100pb by 2023. C$ volatility continues as markets consolidate and focus shifts back to Omicron concerns of increased global covid restrictions adding pressure to commodity-based currencies. Expect C$ to remain under short term pressure with commodity prices expected to come under renewed selling. Support at 1.2750 while resistance remains at 1.2835 if breached look for 1.2948 (2021 high) next.

Euro edges lower post the ECB as focus shifts to surging Omicron and disappointing German data. Euro rallied on hawkish ECB comments testing Nov highs of 1.1361 but struggled to extend its gains due to the interest rate divergence between the ECB and the Fed policies. The German IFO Current Assessment Index declined, highlighting that business confidence weakened in December. No key economic releases today, expect the Euro to remain capped on any rallies. Support at 1.1280 and resistance sits at 1.1350.

EURGBP bounces as GBP weakens on Omicron and political concerns. Support at .8440 (1.1848) with resistance at .8600 (1.1628)

GBP dips below 1.33 as risk-off sentiment returns on Omicron and political uncertainty. Voters gave PM Johnson a shock loss in bi-elections as the conservatives lost a key parliamentary seat they have held since 1841. The BoE rate increase boosted the pound, but at just 15 basis points its perceived as somewhat dovish and highlighted concerns of the Omicrom variant into 2022 with new covid cases holding at record highs. No key data releases today so expect markets to consolidate with the bias of further weakness for the pound. Support at 1.3220 and resistance holds at 1.3310.