Monday January 16th, 2023

The US$ steady, oil prices slip, equity markets mixed, while US yields rise as caution returns to markets. The US$ snaps a 3-day losing streak looking set to rebound from a 7-month low, oil prices ease as risk sentiment waivers as investors assessed whether a rally in risk assets may have overshot given the outlook for inflation and economic growth. The US is closed for Martin Luther King Jr Day, so focus will be on the World Economic Forum in Davos, BoC Business outlook, BoE Governor Bailey Speech, this week China Retail Sales & GDP on Tuesday, Eurozone CPI & BOJ rate decision on Wednesday. In other news. China announced 60k deaths in a month since abandoning pandemic restrictions. The US will hit its debt limit Thursday, start taking steps to avoid default, Yellen warns Congress. German defense minister Christine Lambrecht resigns amid Ukraine war backlash. Volkswagen sees China market accelerating after tough first quarter. Talks on trade rules for the North Ireland protocol resume today in Belgium. Russia-Belarus begins joint military exercises, sparking fear in Kyiv of new offensive in Ukraine. Chinese passengers flock to rail stations ahead of lunar new year holiday which officially starts Jan 21st. In Currency markets. Currency markets are relatively quiet ahead of the US national holiday. JPY slips ahead of BoJ rate decision on Wednesday, while CNY remains under pressure from ongoing covid concerns. ZAR dives after president cancels Davos trip over energy crises. CNY falls 0.4%, while Asian currencies are flat on average vs US$. Trading currencies are mixed with ZAR tumbling 1.8%, MXN falls 0.4%, JPY down 0.35%, AUD eases 0.1%, while SEK is flat, CHF is up 0.1%, NZD & NOK firm 0.2%

Oil prices slip from 2023 highs as markets balance surging Chinese covid cases and a warmer winter in Europe vs optimism for Chinese demand as the country continues to reopen. C$ holds steady near 2-month highs as oil prices hold near 2023 highs and on expectations that the BoC may take a more hawkish tone after strong jobs data. With the absence of the US markets today, focus will be on BoC business outlook survey for intraday direction. Support resets to 1.3335 while resistance lowers to 1.3450.

EURCAD slips in quiet markets ahead of the BoC survey today. Support resets at 1.4450 while resistance rises to 1.4560.

Euro holds 1.0800 after testing 9-month highs in early trading. Euro surged in early trading to 1.0874 a fresh 9-month high and quickly reversed as risk-sentiment cooled. In Europe the ECB De Galhau said last week that the Central bank should aim to reach terminal rate by Summer. He further added that the ECB needs to be pragmatic about the pace of rate hikes. Expect Euro to find support on dips this week supported by a hawkish ECB. Support resets to 1.0780 while resistance rises to 1.0900

GBPEUR slips in a volatile start to the weeks trading. BoE testimony will be in focus today. Support holds at 1.1250 (.8888) while resistance remains at 1.1400 (.8772).

GBP sees a volatile start to the week dropping 80 bps in early trading and recovering to hold 1.2200. The combination of easing risk sentiment, a bounce in the US$ and UK recession fears saw the pound come under selling pressure ahead of BoE Governor Bailey testimony today. Governor Bailey testimony before the UK Parliament’s Treasury Select Committee will be the primary focus today with the absence of US markets today. Support resets to 1.2180 while resistance lowers to 1.2260.