January 24th Morning Update

The US$ stronger, oil prices and equity markets are weaker and US yields are lower. Oil prices rose on worries about supply disruption amid concerns about Russia-Ukraine discord and rising tensions in the Middle East. US State Dept. ordered diplomat’s family member to leave Ukraine as Biden weighs options on increasing military presence. Equity market will continue to be in the spotlight as recent selloff have some thinking it may affect the number of times the Fed will hike in 2022. The market will have a clearer indication after Wednesday’s US rate decisions and following press conference. In other news. NATO sends ships and jets to Eastern Europe amid Ukraine crisis. Two US carriers enter South China sea to ‘counter malign influence’. Covid. WHO head says ‘dangerous’ to assume pandemic is nearing end. Fauci said Sunday he is as “confident as you can be” that the United States will see Omicron COVID-19 cases peak in mid-February but warned that the virus has “surprised us in the past.” Beijing district orders mass virus testing ahead of Olympics. Quebec is set to expand its vaccination passport program as of Monday, making it mandatory to show proof of immunization in order to enter a number of retail settings. In currency markets. ANZAC currencies are under pressure today with AUD down 0.75% and NZD down 0.45%. CNY is fairing a little better down 0.2%.

$CAD hold steady near 2-week high while market sentiment remains bullish given recent move in oil prices. Bank of Canada to announce rate decision on Wednesday. Investors seem convinced that the Fed would begin raising interest rates in March to combat high inflation and have been pricing in a total of four hikes in 2022. Concerns about a possible Russian attack on Ukraine further benefitted the greenback’s relative safe-haven status and extended some support to the USD/CAD pair.

Markit Manufacturing PMI improves to 59 in January vs. 57.5 expected. Prices for goods and services are rising at a joint-record rate as increasing wages and energy costs offset the easing in producers’ raw material prices, dashing hopes of any imminent cooling of inflationary pressures. Ukraine situation and Fed’s rates decision to remain the focus this week.

EURGBP remains in an .8300-.8400 range.

GBP/USD continues to edge lower and trades at its weakest level in more than two weeks near 1.3500. The data from the UK revealed that the private sector’s business activity expanded at a slower pace in early January than it did in December. Growing demands for Prime Minister Boris Johnson’s resignation over a series of lockdown parties in Downing Street continued undermining the British pound. Apart from this, the emergence of some US dollar buying further contributed to the offered sell-off of the GBP/USD pair.