Friday May 6th, 2022

The US$ is lower, oil prices higher, equity markets are down, while US yields firm heading into US Jobs data. The US jobs report will be closely watched for signs of rising hourly wage costs which are seen as key source of inflation pressure and could lead to another spike in US yields. The US$ holds near its 20-year highs as risk aversion and volatility continues to grip markets beset by inflation and growth fears. Intraday US Nonfarm Payroll is expected at 391k vs 431k previously, Unemployment rate to 3.5% from 3.6%, and Fed’s Williams speech for direction. In other news. The EU tweaks Russia oil sanctions plan in a bid to win over reluctant states (Reuters). In China, Xi’s renewed commitment to zero-covid rattles markets – China’s trade seen faltering as growth is expected to have slowed to a crawl in April. In the UK PM conservative party suffer losses in local elections. In Ukraine, Mariupol steelworks civilian rescue bid is under way. The currency markets. Currency market volatility calms heading into the NFP report, but it could be the calm before the storm. GBP holds below 1.24 after BoE highlights 10% inflation and recession. In China ongoing covid concerns sees the CNY hit 1 ½ year lows. YTD EUR is down 6.9%, GBP down 8.7%, NOK down 6.95%, JPY down 13.3%, CNY down 5%, while ZAR is flat, and MXN is up 1.4% vs US$.

Oil prices rise 2% with Brent Crude trading over US$ 113pb as supply concerns persist on Russian oil sanctions, while investors continue to shrug off the prospect of a global economic slowdown. C$ steadies after two days of high volatility, but when you step back the Loonie has firmed 0.25% MTD and is down just 1.5% YTD vs the US$, outperforming its G10 peers. Intraday, alongside US Jobs report, CAD Average Hour Wages, Unemployment rate will be monitored closely by the BoC, as well CAD Ivey PMI report will help provide C$ direction today. Our bias remains to sell US$ on rallies on higher oil prices, increasing exports and ongoing BoC rate hikes. Support resets to 1.2765, while resistance sits at 1.2870.

Euro firms towards 1.06 amid a consolidating US$ ahead of NFP. Euro firms on an easing US$ vs a stronger Euro. Growth concerns across the EU, the increasing EU-Russia energy crisis coupled with the increasing ECB / FED interest rate policy divergence will continue to keep investors on the sidelines and likely cap any Euro’s attempt to rally. Today US NFP will be the primary market driver and dictate currency market direction. Support holds at 1.0475, while resistance resets to 1.0640.

EURGBP rallies aggressively on the dovish BoE comments warning of 10% inflation levels and an oncoming recession. MTD Euro has rallied 2.1% vs GBP. Support resets to .8485 (1.1785) while resistance remains .8600 (1.1628).

GBP bounces off 2-year lows as the US$ corrects ahead of NFP. The pound remains on the back foot, down 8.7% YTD on a combination of political uncertainty, Brexit concerns, then the final straw was BoE comments warning of 10% inflation amid surging energy costs and the possibility of a recession in 2022. The pound will be at the mercy of the US$ direction today, but the potential of a 1.2000 pound by the summer has increased. Support resets to 1.2275 while Resistance lowers to 1.2450.