Monday May 16th, 2022

The US$ & oil prices dip, while equity markets and US yields are mixed on weak China data. China’s economy appears to be paying the price for the nation’s covid zero policy with industrial output and consumer spending sliding to the worst levels since the pandemic began. China’s Industrial output unexpectedly fell 2.9%, retail sales contracted 11.1%, unemployment climbed to 6.1% and youth jobless rate hit a record high. Markets responded by selling equities, oil and CNY tested 20-month lows vs US$. Intraday Fed Williams speech & BoE Monetary Policy report, while markets are focusing on Tuesdays US Retail Sales & the Fed Chairs speech. In other news. European equity markets fell after China’s weak data adds to growth concerns. Ukraine claims battlefield success in the Northeast as Russian troops withdraw. In China, Shanghai aims for June 1st return to normal from covid lockdowns. Sweden and Finland to make NATO applications, while Switzerland leans closer to NATO in response to Russia. India bans the export of Wheat due to falling crop levels. The currency markets. AUD, GBP, NZD & ZAR drop on growth concerns after China data shock. PLN gains ahead of an expected strong Q1 GDP data and RUB nears 5-year highs vs Euro. CNY Dips 0.05%, while Asian currencies are down 0.3% on average vs US$. Trading currencies are under pressure with JPY & MXN are down 0.1%, while NZD & CHF slip 0.3%, AUD & NOK weakens 0.5% and ZAR tumbles 0.75% vs US$.

Oil prices slip on the back of China’s weak economic data fueled fears of a global recession, negatively impacting demand forecasts. C$ eases in early trading on the back of the unexpectedly weak Chinese data and lower oil prices. Intraday markets will focus on oil prices, CAD Housing Starts, Manufacturing and Wholesale sales for direction today. We expect markets to hold within current ranges as investors wait for Fed Chairs comments tomorrow. Support holds at 1.2892, while resistance remains at 1.3090 (Nov/20).

Euro struggles to hold above 1.04 after EU growth forecasts are revised. The EU commission announced today that it lowered the EU area growth forecast in 2022 to 2.7% down from 4% as the Russian-Ukraine conflict weighs heavily on the EU economy. EBC Villeroy said “I expect a decisive June meeting and an active summer” added some support to Euro. Markets will be focused on Tuesdays Fed Chair Powell and ECB President Lagarde speeches. Support holds at 1.0335, while resistance remains at 1.0475.

EURGBP firms on the combination of positive ECB comments while Brexit & growth concerns keeping the pound under pressure. Support holds .8485 (1.1785) while resistance remains .8600 (1.1628).

GBP holds above 1.22 ahead of the BoE Monetary Policy Report hearings. The pound holds steady as markets await the BoE Monetary Policy Report hearing with Governor Bailey Haskel and Saunders testifying before the UK’s Treasury Select Committee. Brexit concerns continue with Ireland’s foreign minister Coveney warned the UK that making changes unilaterally to the NI Protocol would be considered a breach of international law. Expect GBP any rallies to be capped with ongoing growth and Brexit concerns. Support holds at 1.2160 while Resistance remains at 1.2285.