Friday September 9th, 2022

The US$ tumbles, oil prices strengthen, equity markets rally, while US yields are mixed as risk sentiment returns. The US$ slips 1%, equity markets & commodity prices rally as investors assessed whether monetary tightening to tackle inflation in the US and Europe is getting closer to being priced into markets. Euro touched its highest level in three weeks after the ECB’s 75bps rate hike on Thursday. Fed Chair Powell on Thursday reiterated the Fed’s determination to curb inflation, increasing expectations that the Fed will also hike 75bps when it meets on September 21st. Today focus will on ECB’s President Lagarde speech, CAD jobs data alongside three Fed speakers to provide currency markets direction. In other news. King Charles III to address a nation in mourning after the passing of the Queen. China’s consumer, producer inflation slowed in August as covid impacts demand. EU ministers meet over ‘energy war’ as power bills surge across the eurozone. EBC Policy makers say ECB must continue to raise rates to fight inflation. India restricts rice exports as commodity prices surge. In currency markets. Currency markets retest monthly highs as the US$ tumbles, while Japan increases its rhetoric it will intervene to protect JPY weakness. CNY & Asian currencies strengthen 0.5% on average vs US$. Trading currencies rally with MXN up 0.35%, while NZD, ZAR & JPY strengthens 1.3%, CHF rises 1.5% and AUD & NOK rally 1.65% vs US$.

Oil prices rally over 1% supported by supply threats, yet oil remains set for a weekly drop as demand fears continue to linger. C$ rallies from weekly lows of 1.3208 through to a weekly high to 1.2979 on the back of a tumbling US$, improving oil prices, & the BoC hawkish tone improving a risk-on tone. Focus will be on CAD Net Change in Employment (Aug) expectations +15k vs -30.6k (Jul), while CAD Unemployment Rate is expected to hit 5% vs 4.9%. Support resets to 1.2950 while resistance lowers to 1.3050.

Euro stalls at 1.0100 ahead of EBC president Lagarde speech. Euro’s bullish tone continued after the EBC hiked rated 75bps and indicated more rate hikes could come to tackle ongoing surging interest rates. ECB Policymaker Knot said that their priority was policy normalization and added that they had no other option than to continue with resolute rate hikes. Into Q4 we remain bearish Euro as the EU continues to tackle a growing energy crisis and the heightening prospect of a recession across the Eurozone. Intraday focus will be on ECB President Lagarde comments. Support resets to 1.0000 while resistance at 1.0120.

GBPEUR steadies as both currencies rally equally vs the weakening US$. Support holds at 1.1480 (.8710) while resistance remains at 1.1600 (.8620).

GBP rallies through 1.1600 amid the US$ correction & UK stimulus. Risk sentiment improves on hopes from UK PM Truss energy relief plan and supported by the tumbling US$. PM Truss announced she will introduce a two-year “energy price guarantee” ensuring a typical household will pay no more than GBP2,500 a year on energy bills, targeting savings of roughly GBP1,000. The pound snapped a 3-week losing streak primarily driven by the weakening US$, as markets price in further hawkish Fed action. Support resets to 1.1550, while resistance rises to 1.1660.