Friday January 27th, 2023

The US$ is steady, oil prices firm, equity markets are up, and US yields rise as investors shift focus to the FOMC. Equity markets are in positive territory today, while currency markets are stable, but investors remain cautious over company earnings, and on the robust US economic data which increased the possibility of continued rate hikes from the Federal reserve. The Fed is expected to hike rates by 25bps next week, but we will probably hear the Fed say they are entering the final phase of hiking, with the potential of more rate hikes to come. Today AMEX, Chevron, HCA healthcare & others report results today. On the Economic front US Personal Consumption Expenditures, Michigan Consumer Sentiment Index, & Pending homes sales will help provide intraday direction to markets.

In other news. British Finance Minister Hunt signaled he is pushing ahead with tax hikes, while stressing the need to develop Brexit into “catalyst” for UK growth. Adani shares plunge further as it weighs legal action against short seller firm. Consumer inflation in Japan’s capital hits 4.3% y/y near 42-year high, keeping BOJ under pressure. Rents in Canada grow at record pace as housing shortage hits a 21 year low. India expects more clashes with Chinese troops in the Himalayas in security assessment document by Indian Police.

In Currency markets. The US$ Index/currency markets steady head of next weeks Fed meeting. GBP slips from 7-month highs vs US$. AUD hits 8-month high expectations of higher rates and increasing China optimism. ZAR steadies after small than expected rate hike. CNY & Asian currencies slip 0.1% on average vs US$. Trading currencies are mixed. SEK weakens 0.35%, CHF & NOK slip 0.1%, while AUD, ZAR & NZD are flat, MXN up 0.15%, JPY firms 0.35% vs US$.

Oil prices rose for a 2nd day buoyed by stronger than expected US economic growth and ongoing China optimism. C$ strengthened through the key .75 cent (1.3333) level vs US$, testing its strongest level 1.3304 since mid Nov 2022 as commodity markets strengthen on US & China demand optimism. The Federal Reserve meeting next week will be key next week for currency markets. Support lowers to 1.3260 while resistance resets to 1.3395.

EURCAD remains steady as currency markets are sidelined ahead of the US$ rate decision next week. Support lowers to 1.4450 while resistance resets to 1.4650.

Euro remains capped at 1.0900 as markets consolidate ahead of next week’s FOMC meeting. Euro managed to make small gains vs US$ but failed to extend beyond 1.0900 as investors turn cautious ahead of the Fed rate decision next week after stronger than expected US economic growth. In Europe Spanish GDP beat expectations growing at 2.7% y/y Q4, but overall growth eased in Q4 falling from 4/4% y/y Q3. Focus will be on US economic data for intraday direction. Support holds at 1.0800 while resistance remains at 1.0950.

GBPEUR slips as investors remain concerned for the lack of UK longer-term growth strategy. Support holds at 1.1300 (.8850) while resistance remains at 1.1450 (.8733).

GBP fails to hold gains as domestic concerns continue to cap the pounds gains. The pounds weakened from its 7-month highs after Chancellor Hunt speech fails to offset criticism that the government has now long-term growth plan. On Thursday car firms warned the UK does not have a strategy to attract manufactures. Warnings that thousands of firms face collapse, UK car production collapses to its lowest levels for 66 years inflation holds at 40-year highs and wage growth hits fastest rate in 20 years. Markets will likely be sidelined as they BoE & Fed rate decisions next week. Support holds at 1.2280 while resistance resets to 1.2450.