Monday January 9th, 2023

The US$ eases, oil prices strengthen, equity markets are mixed, while US yields rise as risk sentiment improves. Equities, and commodities gain in early trading on improving risk optimism driven by China’s re-opening, while the US$ extends Friday’s weakness. Friday’s US jobs data came in slightly higher than expectations, but wages increased at a slower pace than expected heightening hopes that Fed’s rate hikes are accomplishing their goal. Today sees a light economic data with just CAD Building Permits and speeches from BoE Pill & Fed’s Bostic to help provide intraday direction. In other news. Russia is at risk of becoming failed a state says foreign policy experts at the Atlantic Council (FT). US Politics, speaker McCarthy faces a tough first week seeking to unify Republicans. Sweden warns it cannot meet Turkey’s demands for backing NATO bid. Brazil police arrest 300 after pro-Bolsonaro rioters storm congress. In Currency markets. The US$ Index slips on China re-opening and hopes of slower US rate hikes. CNY strengthens to a 5-month high; AUD hits a 4-month high, and INR has its best trading day in 2-months vs US$. CNY rallies 0.75%, while Asian currencies 0.4% on average vs US$. Trading currencies are mixed with JPY down 0.35%, MXN eases 0.15%, while SEK & CHF firm 0.3%, ZAR gains 0.45%, AUD, NOK & NZD strengthen 0.55% vs US$.

Oil prices gain over 2 ½% on demand optimism as Chinese borders reopen boosting the demand outlook and overshadowed global recession concerns. C$ extends gains, up over 1% month-to-date vs US$ on improving risk sentiment supported by the combination of China optimism, expectation of further BoC rate hikes and a weakening US$. Intraday improving risk sentiment supports a stronger loonie. Support lowers to 1.3314 (Nov 2022), while resistance resets to 1.3472.

EURCAD weakens as oil & commodity prices rebound seeing the Euro fall 1.3% month-to-date. Support lowers to 1.4220 while resistance resets to 1.4390.

Euro tests 1.0700 on improving risk sentiment. Euro rallied in early trading on a weakening US$ as China reopening boosted global risk sentiment. Domestically EU unemployment rate held at 6.5%, but weaker y/y German Industrial Production and a lower-than-expected Sentix Investor Confidence report appears to have capped Euro’s intraday strength. A light economic docket today so we expect to see Euro capped ahead of fresh economic data. Support resets to 1.0630 while resistance rises to 1.0750.

GBPEUR is steady as both currency pairs improves vs the US$ and benefits from improving risk-on sentiment. Support holds at 1.1250 (.8888) while resistance remains at 1.1400 (.8772).

GBP benefits amid upbeat risk sentiment and a softer US$. Broad US$ weakness helped the pound rally from 1.1850 to test 1.2100 since Friday. Domestic optimism improves on news UK PM Sunak to meet with union leaders, with suggestions the PM may be open to a one-time pay hike. BoE cited “the cap on energy prices allows for a restructuring of spending in the rest of the consumption basket and thus potentially higher inflation in the case of all other products”. Intraday BoE’s speech will be watched closely for direction on inflation and interest rates. Support resets to 1.2000, while resistance rises to 1.2150.