Friday December 3rd, 2021

The US$ is flat, oil prices rally, equity markets and US yields are mixed heading into payrolls Friday. Markets are focused on the US Nonfarm payrolls which is expected to rise by more than 500k for a second straight month in November. If the NFP is at or above 550k the US$ should preserve its strength, and maintain expectation of a US rate hike in 2022, while in Europe the Euro weakened after the ECB President Lagarde’s dovish narrative reiterating it is unlikely to see an interest rate in the EU in 2022. In other news. The US Senate passes bill to avert government shutdown until mid-Feb. Ukraine says that a large scale Russian offensive possible in January. Under pressure from Chinese Regulators DIDI plans a NY delisting and a Hong Kong debut. Covid. The WHO says vaccination, not travel curbs are key to battling the Omicron variant. The US implements new covid travel testing rules which will take effect on Monday. Slovakia sets a new daily case record; German says more than 1% of Germans are currently infected with covid and South Africa new cases have risen 300% in a week. In currency markets. Turkish Lira edges near record lows at 13.73 vs US$, Eur is down 7.5% YTD, JPY nears down 10% YTD and US$ Index remains bullish with expectations of strong jobs growth and the prospect of interest hikes into 2022. CNY firms 0.1% while Asian currencies are down 0.1% on average vs US$. Trading currencies are mixed with NOK down 0.3%, JPY & ZAR are down 0.1%, while MXN is flat and AUD & NZD up 0.5% vs US$.

Oil prices extend gains, up 2% after OPEC maintained its plan to increase supply which is a vote of confidence in the near-term demand outlook but said it could act if demand weakens. C$ rebounds from near 2-month lows in early trading as oil prices extend their gains providing support to the loonie ahead of today’s jobs report. In a poll, analysts are sticking with their bullish forecast for the C$ despite the Omicron variant, expecting oil prices to rebound and BoC to hike interest rates before the US Fed. Today focus will be on the US NFP and Canadian Net Change in Employment, alongside Omicron and oil prices updates for intraday direction. Support holds at 1.2745, while resistance resets to 1.2895 (Sept20th).

Euro remains under pressure amid the ECB’s dovish tone and US Jobs report. Investors remain cautious being long Euro after ECB President Lagarde stuck with the dovish narrative saying it was unlikely to see any interest rate hikes in 2022. The divergence between the ECB vs BoC, BoE and the Fed will likely keep pressure on the Euro as its peers raise interest rates and investors favouring higher yielding currencies. Adding further pressure to the Euro is the increasing covid restrictions being imposed across the EU states, while the US & UK are adopting to avoid lockdown restrictions. Support holds at 1.1280, if breached look for 1.1235 next while resistance holds at 1.1365.

EURGBP remains volatile within the .8480 – .8550 range as Brexit and Interest Rate policies continue to see the pair ebb & flow. YTD EURGBP is down 4.6%. Support at .8440 (1.1848) while resistance at .8550 (1.1695)

GBP drops below 1.33 head of NFP and Brexit concerns. The prospect of a strong US NFP and the Fed’s hawkish comments continues to support the US$. Domestically, ongoing Brexit uncertainty related to the Northern Ireland protocol continues to overshadow the US/UK post Brexit trade agreement. Today, Market Services PMI dropped showing the strongest inflation pressure in almost 23 years curbed growth in the UK services firms. Focus remains on US NFP for intraday direct, but overall bias remains bearing for the pound. Support resets to 1.3195 with resistance lowers to 1.3310.