Monday March 6th, 2023

The US$ is steady, oil prices weakens, equity markets are mixed, while US yields ease as China growth disappoints. Commodity prices eased, while currency & equity markets paused in early trading after China set a modest 5% growth target in 2023 on Sunday at the National People’s Congress. Markets are expected to remain cautious heading into Tuesdays & Wednesday’s Fed Chair’s testimony, Wednesday’s EU Growth data, BoC Rate Statement and Fridays key US jobs report. Today’s focus will be on US Factory Order’s & CAD’s Ivey PMI data to provide intraday direction.

In other news. ECB must do more to tackle inflation ‘monster’ says ECB President Lagarde. Wagner chief says Russian position at Bakhmut at risk without promised ammunition. South Korea companies to pay to resolve forced labour dispute with Japan. President Biden plans Philadelphia swing-state union backdrop for budget proposal. Climate change to cost Germany up to 900 bln euros by 2050-study.

In Currency markets. Markets consolidate ahead as China’s growth projections disappoint risk-on sentiment and caution remains heading into this week’s Fed Chairs Testimony. CNY weakens 0.4%, While Asian currencies are down 0.2% on average vs US$. Trading currencies are mixed with JPY down 0.15%, MXN slips 0.25%, SEK & ZAR are down 0.4%, AUD & NZD weaken 0.6%, NOK tumbles 0.75%, while CHF is up 0.1% vs US$.

Oil prices weaken as oil markets consolidate ahead of Fed Chairs Powell testimony this week and after China posted lower-than-expected targets for economic growth in 2023 at near 5%. C$ slips on the slow China growth expectations and caution ahead of the BoC rate decision on Wednesday. The BoC is expected to hold interest rate steady, while the Fed is to expect to maintain its hawkish stance and with the expected widening gap in interest rates will likely keep selling pressure on C$ in the short-term. Support holds at 1.3540 while resistance remains at 1.3650.

EURCAD is steady, but we expect further short-term pressure on C$ as the ECB maintains its hawkish rate stance. Support resets to 1.4380 while resistance rises to 1.4550.

Euro remains capped at 1.0650 on disappointing EU data and sluggish China growth expectations. Euro stalled in early trading after Sentix investor confidence in March fell to -11 and Eurozone Retail Sales rose 0.3% with both data points missing expectations. ECB President Lagarde maintains its hawkish stance saying it must do more to tackle inflation, but said the central bank is not seeking to break the economy but prices pressures remain sticky. We expect Euro to find support on dips as inflationary pressures supports stronger domestic rates. Support holds at 1.0580 while resistance remains at 1.0700.

GBPEUR eases in early trading as the ECB maintains its hawkish stance. Support holds at 1.1250 (.8888) while resistance remains at 1.1400 (.8772).

GBP slips towards 1.2000 amid cautious risk sentiment. The combination of weaker than expected China growth expectations and caution heading into the Fed Chairs testimony this week. On a positive note, the UK construction activity picks up and surprises markets as the outlook improves. Domestically cautious optimism remains around the Brexit solution for Northern Ireland and easing labor disputes are taking some pressures off pound weakness. Support drops to 1.1950 while resistance resets to 1.2040.