Monday December 19th, 2022

The US$ eases, oil prices rise, equity markets are up, while US yields are mixed as risk sentiment remains cautious. Investors continue to remain cautious after last week saw a flurry of central bank announced their interest rate decisions which dented the appetite for riskier assets. China reported its first covid death adding to the souring risk sentiment. Markets found some support after Chinese state media reported some goals for economic progress, laid out at the annual Central Economic Work Conference. Today sees a light economic docket as markets are expected to slow into Christmas. Tomorrow sees the RBA Meeting Minutes, China & Japan Interest Rate Decision. In other news. German IFO Institute said business morale rose more than expected in December. The EU makes final push for gas price cap deal in 2022. In South Africa Ramaphosa reelected the lead of ANC. COP15 finalize “historic” deal to halt, reverse destruction of nature by 2030. EU corruption scandal could hit ties with Doha, Qatar diplomat warns (FT). Morgan Stanley’s Wilkson say’s US equities are set for their worst year since 2008/2009. Russian ‘kamikaze’ drones hit Kyiv as President Putin heads for Belarus. China reports first covid deaths in weeks as official count questioned. Youth in Spain sees jobs gain after years of instability. In Currency markets. The US$ eases in thinning holiday trading markets, while a possible policy shift in Japan helps support the JPY. ZAR rallies aggressively after it re-elects President Ramaphosa. CNY steadies it’s the currency balances covid concerns vs pledge of economic support. CNY is flat, while Asian currencies are up 0.2% on average vs US$. Trading currencies are mixed with MXN down 0.2%, while NOK gains 0.1%, NZD & CHF are up 0.2%, JPY, CHF & AUD firm 0.4%, and ZAR rallies 2% vs US$.

Oil prices improve as China demand hopes offset global recession fears. C$ firms in early trading on the back of a weaker US$ and stronger oil prices after China reported some economic progress. Today sees a light economic docket with CAD Industrial Product Price & Raw Material Price Index, with investors expected to be sidelined until Tuesdays CAD Retail Sales report & Wednesdays inflation report. Heading into the Christmas holidays we expect markets trading to thin with the potential of increased volatile trading. Support holds at 1.3600 while resistance remains at 1.3730.

EURCAD stalls as oil prices improve and C$ improves on optimism of growing Chinese demand. Support holds at 1.4440 while resistance remains at 1.4634 (Feb 4th highs).

Euro consolidates above 1.0600 after upbeat German data. German IFO Institute said business morale rose more than expected in December with an improved outlook despite the energy crisis and ongoing high inflation levels. ECB VP Luis de Guindos said the central bank will not revise its mid-term price stability goal of 2% as that would undermine credibility. Intraday expect Euro to remain within its current trading range. Support holds at 1.0560 while resistance holds at 1.0715.

GBPEUR firms in quiet trading as markets follow the hawkish ECB vs the dovish BoE. Support holds at 1.1420 (.8756) while resistance remains at 1.1600 (.8620).

GBP firms amid a weaker US$. The pound fails to hold 1.2200 as ongoing economic challenges continuing energy crisis and a dovish BoE policy outlook is starting to take its toll on the increasingly fragile pound. Ongoing strike action surrounding workers’ pay continues to add political uncertainty which will add further pressure on the pound heading into 2023. Focus will be on Thursday key UK GDP report which will be a key signal for GBP heading into Christmas. Support holds at 1.2100, while resistance remains at 1.2220.