Monday November 14th, 2022

The US$ rallies, oil prices weaken, equity markets are mixed while US yields are up as Fed tone eases risk-on sentiment. Treasury yields & the US$ turned positive after comments on the weekend from Fed Reserve Governor Waller that policymakers had “a ways to go” before ending interest rate hikes. Commodity prices eased; oil prices dropped near 1% in early trading as Chinese cities including Beijing report record covid cases. Today Investors will monitor the G20 summit in Indonesia, as well more central banker speakers including Fed Brainard & Fed Williams, ECB De Guindos & Swiss Jordan while the US economic docket is light. In other news. At the G20 Biden, Xi greet each other warmly ahead of the summit. In crypto; as regulators scrutinize FTX, rival exchanges try to reassure investors. US House control hinges on tight races after Democrats take the Senate. Turkey blames deadly bomb on Kurdish militants, arrest Syrian woman. Goldman Sachs expects “significant” decline in US inflation 2023. Britain, France sign deal to boost cooperation on illegal migration. China allows property developers to access some pre-sale funds. In Currency markets. The US$ rallies in early trading after falling 4% last week after Fed’s Wallers cautions on inflation. CNY rallies to a 2-month high after regulators announce support for the domestic property sector.  CNY strengthens 0.6% while Asian currencies are down 0.2% on average vs US$. Trading currencies are under pressure MXN eases 0.3%, AUD & NZD weaken 0.6%, CHF, ZAR & SEK fall 0.7%, NOK is down 0.8%, JPY tumbles 1.35% vs US$.

Oil prices pared gains on a strengthening US$ and demand concerns on reports of record high covid cases across major Chinese cities. C$ weakens in early trading as the combination of rising Chinese covid cases, cautious Fed comments and a strengthening US$. In the bigger picture C$ is outperforming its peers heading into a light US docket expect focus will be on Fed comments & oil prices for intraday direction. Support resets to 1.3480 while resistance rises to 1.3600.

EURCAD weakens as risk off sentiment put increasing pressure on the Eur. Support holds at 1.3600 while resistance remains at 1.3750.

Euro dips below 1.03 despite upbeat EU data as the strengthening US$ dominates. The EU showed a bigger-than-expected increase in industrial production in September. Risk sentiment eased after Fed Waller argued that the reaction to the inflation report showed that markets were ‘way out in front’. Intraday focus will be on Fed Williams and Brainard to see if their comments follow Fed Wallers lead and push back on market optimism. Support resets to 1.0230 while resistance lowers to 1.0330.

GBPEUR edges higher as investors remain optimistic ahead of Thursday’s budget announcement. Support holds at 1.1400 (.8772) while resistance remains at 1.1525 (.8677).

GBP drops below 1.1800 as risk mood sours. The pound weakened vs US$ but outperforms its peers as the pound is finding an underlying support. Investors appear to be maintaining some optimism ahead of this week’s UK governments expected budget plan on Thursday. Chancellor Hunt said on Sunday “I think I’ve been completely explicit that taxes are going to go up and that’s a very difficult thing for me to do because I came into politics to do the exact opposite. Intraday expect the pound to hold within current ranges. Support resets to 1.1730, while resistance lowers to 1.1850.