Monday April 11th, 2022

The US$ is steady, oil prices are down, equity markets are lower while US yields rise on geopolitical & economic risks. France’s Macron holds his narrow lead over challenger Le Pen, the Fed last week signaled sharp interest rate hikes keep pressure on equity markets, while in China covid curbs threaten to exacerbate supply-chain issues. Ukraine repulses attacks as Russia presses to control Mariupol, while the Austrian Chancellor heads to Moscow to meet President Putin. In Europe NATO member prospects grow for Finland & Sweden as recent polling indicates that sentiment is shifting. Intraday the economic calendar is light so focus will be on Fed Bowman & Williams speech ahead of Tuesdays key US inflation report. In other news. Oil prices slips 2% on the release of US strategic oil reserves and slowing demand related to covid lockdowns in China. China Auto sales slump in March on covid lockdowns, while Shanghai eases lockdown in some areas despite record covid infections. The Fed is expected to deliver raise rates by 1% by June, while economists polled by Reuters say the probability of a recession in 2023 is 40%. Over 13 million poultry birds culled in France due to bird flu. Russian oil embargo could be part of the next round of EU sanctions package, EU minister say. The currency markets. GBP is under pressure as data shows the UK economic growth stutters. Euro rebounds as President Macron maintains his lead heading into the 2nd round of elections. JPY weakens towards 7-year lows on a combination of higher global rates, soaring inflation and energy costs. CNY dips 0.1%, while are down 0.35% on average vs US$. Trading currencies are under pressure with outlier ZAR up 0.4%, while CHF & MXN is flat NZD & AUD down 0.1%, NOK slides 0.6% and JPY tumbles 0.9% vs US$.

Oil prices fall almost 3% on the combination of the US, IEA and others releasing oil from their strategic reserves over the next several months alongside a slowdown in demand from China due to domestic covid lockdowns. Expect oil prices to remain volatile as the EU considers including oil as part of their next round of sanctions. C$ slips in early trading as oil prices weakens, but overall the C$ will be supported by optimistic economic signals, strong jobs data and CAD 10-year yields hitting 8-year highs heading into the BoC rate decision on April 13th. Intraday the economic calendar is quiet; focus will be on US inflation data on Tuesday and BoC rate decision on Wednesday. Bias remains to sell US$ on this rally. Support rises to 1.2530 while resistance resets to 1.2625.

Euro holds on to modest gains on election updates. President Macron got around 28% of the vote vs 24% for Le Pen in the first round of Frances President voting and Macron is leading 54% to 46% heading into the 2nd round of voting. The Euro is struggling to hold on to gains as risk-off sentiment remains and with the increasing interest rate divergence between the ECB & the Fed is likely to add further pressure on the Euro. Focus will remain on Ukraine & Presidential updates for intraday direction. This week, the US Inflation report on Tuesday and Thursdays ECB policy meeting will be key this week. Bias remains to see Euro potentially weaker towards 1.05 in 2022. Support lowers to 1.0860, while resistance holds at 1.0935.

EURGBP recoups lost ground as Euro consolidates with French President Macron manages to maintain his lead in Sunday’s election. Support holds at .8300 (1.2048) while resistance remains at .8425 (1.1869).

GBP pares early losses, holding above 1.3000 despite disappointing economic results. UK growth slips as Feb GDP slipped to 0.1%, below expectations and down from Jan’s 0.8% growth, as well Manufacturing production in Feb (MoM) also slipped to -0.4% vs +0.9% in January. The pound remains under pressure as domestic growth is under pressure from the increasing risk-off sentiment, rising domestic covid cases and ongoing supply chain issues. Expect the pound to be steady with the lack of US economic data releases today, but bias is we will see the pound continue under pressure vs US$. Support resets to 1.2955 while Resistance lowers 1.3070.