Monday May 9th, 2022

The US$ extend gains, oil prices slip, equity markets weaken, while US yields firm as risk aversion sweeps through global markets. The US$ extends gains to fresh two-decade highs after Friday’s jobs data left little doubt the Fed will keep on course for its rate-increase and quantitative-tightening plans. China’s ongoing zero-covid policy sees export growth hit 2-year lows, while equity markets are down 16% from November’s peak and oil prices decline as slowing Chinese demand outweighed the G7 pledge to ban Russian oil. Intraday with no high-impact data releases markets will remain focused on Ukraine updates, US yields and President Putin’s comments for market direction. In other news. Ukraine reports fierce fighting as Russia marks Soviet WW2 victory. China’s two biggest cities Shanghai & Beijing tell residents to avoid social contacts. China says it carried out drills near Taiwan to improve joint combat operations. The currency markets. MLIV Pulse survey said Euro is more likely to hit 1.0000 vs US$ than hit 1.10 next. CNY slips to 19-month lows, GBP retested 2-year lows as the US$ index extends gains to 20-year highs on Safe-Haven and hawkish Fed US$ buying. CNY tumbles 0.9%, while Asian currencies are down 0.6% on average vs US$. Trading currencies remain under pressure with CHF lower 0.25%, JPY down 0.5%, NOK weakens 0.65%, while MXN falls 0.9%, and AUD, ZAR & NZD tumble 1% vs US$.

Oil prices fall over 1% in early trading as demand concerns from China’s lockdowns our weighed the G7’s commitment to ban/phase out Russian oil. C$ weakens in early trading as oil prices ease and the US$ continues to surge on the combination of a hawkish Fed and heightening global risk aversion. C$ remains the best performing G7 currency vs US$, finding support from firm commodity prices and high CAD yields. Support resets to 1.2870, while resistance rises 1.2963 (Dec20/20).

Euro holds above 1.05 after disappointing Investor confidence data. The Sentix Investor Confidence Index tumbled to -22.6 in May as investors grow increasingly concerned that the EU is edging towards stagflation. A recent MLIV Pulse survey showed 60% of FX traders expect to see Euro hit party (1.000) vs 1.1000 as the stagflation threat rises and Russia/EU are both set to lose from gas sanctions. ECB Rehn reiterated that July could see an ECB rate hike, but his comments had little impact on the Euro. Support holds at 1.0475, while resistance resets to 1.0640.

EURGBP are flat as both currencies remained under pressure as global risk concerns continue to rally the US$. Support holds .8485 (1.1785) while resistance remains .8600 (1.1628).

GBP remains volatile as focus shifts to Brexit issues and domestic politics. The EU says it is ready to restart talks on the Northern Ireland protocol envoy says, while Belfast takes Sinn Fein’s historic election win in its stride. The pound remains on the back-foot after Thursday’s BoE gloomy growth outlook triggered an investor exit of the pound. Global recession fears, China’s economic slow and Friday’s strong US jobs data continues to keep the US$ the currency of choice for investors. Support holds at 1.2275 while Resistance remains at 1.2450.