Friday July 15th, 2022

The US$ dips, oil prices are steady, equity markets are up, while US yields fall amid investor caution. Equity markets gained, US$ holds near 20-year highs, Euro sits near parity, copper tumbles to 20-month lows, while oil prices look poised to end the week below US$100 a barrel for the first time since April as fears of a worldwide recession continues to mount. Markets are focused on the EBC meeting Jul 21st expected to raise +0.25% & the Fed meeting July 27th expected to raise +0.75%, with the pace of monetary tightening and falling liquidity expectations remain for further market volatility in July. In focus today; US Retail Sales, Michigan Consumer Sentiment Index & Fed Index of Common Inflation expectations (Q1). In other news. China’s GDP rose 0.4% in Q2 narrowly avoiding contraction, prompting analysts to call for more fiscal & monetary stimulus to spur growth. President Biden looks set to leave Saudi Arabia with no announcement on oil. G20 finance chiefs meet in Indonesia as Ukraine & inflation top the agenda. Rio Tinto warns of earnings hit from Covid absences, inflation, and risk of weaker demand. Italian president rejects PM Draghi’s resignation setting the stage for an early election. 45 countries sign a pact to punish Russian war crimes; 2.5 million people have moved from Ukraine to Russia, UK says (CNBC). The currency markets. INR continues to set fresh record lows, ZAR holds near 2-year lows, CNY hits 2-month lows, US$ holds near 20-year highs as global recession concerns grow. CNY dips 0.1%, while Asian currencies are flat on average vs US$. Trading currencies are mixed with NOK & ZAR fall 0.20%, AUD down 0.05%, while NZD is flat, JPY & MXN firm 0.15%, while CHF strengthens 0.5% vs US$.

Oil prices firms after a US official said an immediate Saudi output boost is not expected. OPEC+ wants more stable oil market and would back any accord between Saudi/US if a deal is agreed during President Biden visit. C$ volatility continues after the loonie traded between 1.2934 Wednesdays to Thursdays to 1.3223, C$ is opening today in the middle of the range at 1.31. C$ recovered as expectations of a Fed hike of 1% fell to 0.75% on Fed comments, the US$ rally stalling and oil prices rebounding. Intraday we expect C$ to hold at current levels as markets consolidate going into the weekend. Support holds at 1.3030 while resistance remains at 1.3180.

Euro stalls below 1.0100 ahead of US Retails Sales. Euro rebounded from a fresh 20-year low of 0.9952 on Thursday, but the currency remains vulnerable to further weakness heading into the July Fed meeting. The ECB is expected to hike 0.25% at its meeting July 21st, while energy concerns, China’s slowing growth, increasing covid concerns and the ongoing Ukraine-Russian war will keep pressure on Euro in the coming months. Intraday, focus will be on US Retail Sales will provide direction for the Euro. Support holds at 1.0000, if breached .9950 next while resistance remains at 1.0085.

EURGBP bounces as UK political uncertainty curtails the pounds’ ability to strengthen. Support holds at .8435 (1.1855) while resistance remains at .8600 (1.1628).

GBP bounces off 20-month lows, clinging to modest gains above 1.1800. The pound rebounds as the US$ rally stalls and markets steady ahead of the US$ Retail Sales. Domestically the initial 11 tory leader hopefuls have been whittled down to 5 and they are heading into their first televised debate tonight. In the short term we expect the pound to remain under pressure with continuing political uncertainty, increasing covid concerns and longer-term growth concerns. Intraday US Retail Sales will be the primary driver today. Support resets to 1.1757 (2022 lows) while resistance remains at 1.1900.