Monday July 4th, 2022

The US$ slips, oil prices are steady, equity markets are up, while US yields are mixed as risk sentiment improves. Investors remain cautious trapped between the threat of recession and ongoing inflation worries, but risk mood improves in quiet markets. Currency markets are stable with the US Independence Day holiday, while European equity markets bounce for the first time in 4-days as dip-buyers emerge. Intraday US markets are closed, so focus will be on CAD Global Manufacturing PMI, BOC Business Outlook, and ECB Elderson speech for direction. This week investors will be focusing on the key US Nonfarm payrolls on Friday. In other news. President Biden may ease China tariffs this week (WSJ). More UK firms than ever are planning imminent price increases in the next three months according to the British Chambers of Commerce. Turkey’s annual inflation soars to almost 80%, hitting its highest level in 24-years, while Swiss inflation hits a 29-year high at 3.4%. Russia claims full control of eastern region of Ukraine after seizing the last stronghold. Scottish voters remain split over independence after fresh referendum bid. Several eastern Chinese areas in mass covid testing to curb new waves of infections. The currency markets. Safe-haven US$ demand keeps Euro near its 5-year lows, the GBP steadies as support returns head of BoE meeting this week. AUD & NZD rebounds aggressively Fridays sell off. We expect currency markets to hold within current ranges heading into a quiet North American session with the absence of the US today. CNY firms 0.15% while Asian currencies are up 0.1% on average vs US$. Trading currencies are mixed with JPY down 0.15% while CHF & MXN are flat, NZD firms 0.65%, ZAR strengthens 0.75% and AUD & NOK rally 0.9% vs US$.

Oil prices rebound from intraday lows as investor continue to balance recession fears vs ongoing tight supply concerns as Norwegian oil workers are expected to strike on Tuesday. Oil prices could hit US$380 if Russia slashes output cover price cap J.P.Morgan says (Reuters). C$ firms in thin trading as oil prices rebound from their lows and the US$ is sideline with 4th July holiday. This week we have a flurry of CAD economic releases including Unemployment data, Ivey Purchasing Managers Index. Today’s S&P Global Manufacturing PMI & BoC business outlook will help provide intraday direction. Support lowers to 1.2815 resistance resets to 1.2900.

Euro consolidates at 1.0450 after weaker EU data. Softer than expected Eurozone PPI & Sentix Data results keeps the Euro capped even as the US$ eases in thin trading. Focus remains on ECB policymakers’ speeches for possible signals if the ECB will hike ¼% or ½% in July after EU inflation hit 8.6% in June. The absence of fresh economic data we expect the Euro to stall below 1.0475 today. Support holds 1.0400 while resistance sits at 1.0475.

EURGBP is steady as currency markets consolidate ahead of the US holiday. Support holds at.8560 (1.1682) while resistance remains at .8680 (1.1520).

GBP rebounds aggressively after tumbling on Friday. The pounds rallies over 1% from Friday’s lows of 1.1973 as investors focus to BoE’s meeting this week. In the bigger picture significant headwinds over slowing economic growth, ongoing inflation, and Brexit uncertainties. Over the weekend foreign ministers of Germany & Ireland said in a joint statement that the UK was breaking an international agreement referring to the Northern Ireland Protocol. Growth & Inflation concerns continue to impact markets after British Chambers of Commerce expect more price increase and Scottish referendum issues continue to make headlines. Expect consolidating markets, with a bias to sell GBP on rallies. Support rests to 1.2080 while resistance rises 1.2180.