Friday February 4th, 2022

The US$ dips, Oil prices extend gains, Equity markets & US yields are mixed heading into key US jobs data. Markets will be focused on January Nonfarm Payrolls report which could show Omicron caused the first steep decline in payrolls in more than a year. The US$ index weakens into the jobs report while Euro holds its gains after the ECB’s “hawkish” turn yesterday which surprised markets saw the Euro rally 2% month-to-date. In other news. Oil prices hit 7-year highs as US storm increases supply concerns. President Putin arrives in Beijing for the Winter Olympics, at the same time China/Russia agree to a 30-yer gas deal via a new pipeline. US warns Chinese firms against helping Russia against potential Ukraine sanctions. Covid. India’s official covid death toll crossed 500k on Friday. The WHO director says Europe entering ‘plausible endgame’ to the pandemic. Europe recorded 12 million new covid cases last week. In currency markets. Commodity currencies remain under pressure, Euro holds on to Thursdays gains, while Russian Rub firms with the Putin/Xi meeting. CNY up 0.05%, while Asian currencies are flat on average vs US$. Trading currencies are mixed with JPY up 0.1%, while CHF, MXN & NOK down 0.25%, NZD & ZAR weaken 0.55%, and AUD tumbles 0.7% vs US$.

Oil prices set for yet another weekly gain, hitting 7-year highs as ongoing geopolitical tensions and winter storms in the US fueled supply and distribution concerns. Year to date Brent crude has rallied 17%, while Citi research expects the oil market to flip into surplus into Q2/22 potentially capping rallies. C$ remains under pressure despite oil prices test 7-year highs, higher CAD bond yields and the ongoing hawkish tones out of the BoC. Jobs reports in Canada and the US will provide intraday direction to the currency markets. Bias remains to sell US$ on current rallies. Support holds at 1.2647, while resistance remains at 1.2740.

Euro clings to Thursday’s gains heading into the US Jobs data. The ECB’s hawkish comments surprised markets, closed-out short Euro positions and seeing Euro rallying to 3-week highs. Domestically EU retail sales declined 3% in December, but the report didn’t dent the Euro as investors wait for the US jobs report. Support rises 1.1410 while resistance resets at 1.1495.

EURGBP climbs to a 6-week high after the ECB’s hawkish comments which overshadowed the BoE ¼% point rate hike. Support holds .8280 (1.2077 – 18 Feb 20 low), while resistance rises to .8470 (1.1806)

GBP slips towards 1.3550 ahead of US jobs data. The pound remains under pressure after hitting a 2-week high 1.3629 post BoE rate hike, and then weakened after the ECB’s hawkish comments & BOE cautious comments. The BoE Governor Bailey acknowledge that the economic outlook was worsening which added to the pound’s weakness. Intraday US jobs report will be the primary driver for the currency markets today. Support holds at 1.3535, while Resistance resets to 1.3625.