Friday June 24th, 2022

The US$ weakens, oil prices firm, equity markets strengthen, while US yields rise as markets look beyond short-term interest rate hikes. Investors continue to focus on how central banks will battle surging inflation levels while managing heightened recession risk. The US$ slipped, heading into its first weekly decline in June as traders adjust their focus on where interest rates are heading, to what the central banks will need to do next to counter recession risks. Intraday BoE Pill & Haskel are speaking, US Michigan Consumer Sentiment Index & New Home Sales will help provide direction to markets. In other news. Recession in US and Europe ‘increasingly likely’, warn economists (FT). UK PM Johnson’s leadership comes under renewed pressure after conservatives suffer crushing by-election defeats. EU plan for life without Russian gas a priority as leaders meet (Reuters). Ukrainian troops ordered to retreat from Sievierodonetsk. Russia heads towards default as payment deadline on Sunday looms. President Biden heads to Europe for G7 & NATO summits. The currency markets. The US$ heads into its first weekly loss in June, CAD, AUD & NZD under pressure as recession fears weigh on commodities. CNY is set for its first weekly gain in June, while in June MXN is down 1.7%, THB 3.5%, JPY 5% vs US$. CNY is up 0.05%, while Asian currencies are up 0.15% on average vs US$. Trading currencies are mixed with JPY down 0.1%, while ZAR is flat, MXN is up 0.1%, NZD firms 0.35%, AUD & CHF strengthen 0.45% and NOK rallies 0.8% vs US$.

Oil prices firm 1% but remain set for a 2nd-weekly drop as recession fears and high prices are impacting demand. OPEC are set to meet next week but are not expected to raise supply beyond their initial planned increases. C$ lingers above 1.2950 as recession fears continue to weigh on commodities, while the Fed is anticipated to be more aggressive on interest rate hikes vs the BoC which puts additional short-term pressure on the loonie. Intraday there are no CAD releases, so markets will remain focused on US economic releases and oil prices for direction. Support holds at 1.2930 resistance remains at 1.3025.

Euro posts modest gains amid a weaker US$. Euro is benefiting from a weakening US$ but remains capped at 1.0600 as recession fears grow as EU data continues to disappoint investors. German IFO business fell in June, which followed disappointing EU PMI data on Thursday. Investors are starting to scale back expectations from the EBC on interest rate hikes as recession fears grow and uncertainty increases after Russia threatens Lithuania a NATO member. Our bias remains that we likely see Euro at parity vs US$ in 2022. Support holds 1.0470, while remains at 1.0575.

EURGBP weakens as GBP strengthens more on the weakening US$, despite domestic political and economic headwinds. Support holds at .8530 (1.1723) while resistance resets to .8630 (1.1587).

GBP retests 1.2300 as the US$ retraces, ignoring disappointing economic data and political uncertainty. The Conservative Chairman resigns after his party loses two parliamentary sears in by-elections setting the conservatives back, while the UK PM Johnson promises to keep going. The UK May Retail Sales fell 4.7% highlighting slowing growth and highlighting the increasing potential of a UK recession. Our bias remains for the pound to remain under pressure for a breach of 1.2000 vs US$ in 2022. Support resets to 1.2225 while resistance rises 1.2325