Monday January 23rd, 2023

The US$ eases, oil prices hold steady, equity markets are mixed, while US yields firm after dovish Fed. The US$ index eases while Euro tests a fresh 9-month high after a flurry of Fed officials laid out the case for a dovish shift in the US central bank’s rate-tightening campaign, which is in contrast with the increasing hawkish rhetoric of ECB policy makers. Money markets are pricing in a 98% chance that the Fed will hike rates by just 25bps at its February meeting. Focus this week sees a fully of key earnings including Visa, J&J, Amex, Microsoft, Tesla, GE & others. Tuesday PMI data in US, EU, UK & Japan. Today focus will be on ECB President Lagarde speech while the economic docket is light with just US Chicago Fed National Activity Index & CAD New Housing Price Index.

In other news. Germany signals shift in veto on Leopard tanks for Ukraine. Activist investor Elliott management takes a multi-billion-dollar investment state in Salesforce. EU to examine seizing confiscated Russian assets for reconstruction. Goldman Sachs to cut asset management investments that weighed on earnings. Chris Hipkins set to be New Zealand’s next PM. Massive power cut hits most of Pakistan after a breakdown in the national grid.

In Currency markets. Asian markets are quiet with the Lunar New Year holiday celebrations. US$ index eases as markets focus on a growing dovish tone ahead of the Feb 1st Fed meeting. Expectations for Euro has flipped with pundits calling for a possible 1.14 Eur/US$ in Q1/Q2 from an increasingly hawkish ECB. CNY eases 0.15%, while Asian currencies are flat on average vs US$. Trading currencies are mixed with JPY down 0.45%, ZAR eases 0.25% while CHF is flat, NZD, NOK & MXN firm 0.1%, and AUD & SEK rally 0.6% vs US$.

Oil prices hold steady near 3-month highs on the prospect of China’s economic recovery. C$ extends gains in early trading on the back of a weakening US$ and as oil priced edge higher. Markets are focusing on Wednesday’s BoC monetary policy report with expectations we will see the bank deliver its final ¼% rate hike as inflation shows signs of cooling. Intraday CAD new housing price index may have a minimal impact on the loonie. Support resets to 1.3305 while resistance lowers to 1.3425.

EURCAD strengthens as investors turn bullish on Euro on increasing hawkish comments from ECB policy makers. Support holds at 1.4500 while resistance remains at 1.4685.

Euro tests fresh 9-month highs hitting 1.0900. Euro extends gains as the ECB increases its hawkish rhetoric while at the same time the Fed downshifts to adopt a more dovish tone on rates in 2023. Focus will be on ECB President Lagarde’s speech today for further sign of interest rate direction from the central bank. Support rises to 1.0830 while resistance resets to 1.0950.

GBPEUR weakens in early trading as on a combination of a hawkish ECB and weakening UK economic outlook. Support holds at 1.1300 (.8850) while resistance remains at 1.1450 (.8733).

GBP weakens in early trading despite a weaker US$. Ongoing labor disruptions, continuing energy crisis, weak growth prospects while inflation remains high is causing the UK to fall behind its peers. Markets are looking to PM Sunak for further stimulus measures to help boost the economy but markets may have to wait until the Finance Ministers budget statement in March. Support holds at 1.2280 while resistance resets to 1.2400.