Monday November 21st, 2022

The US$ rallies, oil prices ease, equity markets weaken, while US yields rise on increased China covid concerns. Risk sentiment waned amid concern that China may tighten covid restrictions after several covid-related deaths were reported over the weekend. Worsening covid outbreaks across China increased concerns that authorities may resort to harsh restrictions, with some cities already suspending schools, locked down universities and asked residents to stay at home for 5-days. A light economic docket today with just US Chicago Fed National Activity Index for markets to focus on. This week primary focus will be on Wednesday’s FOMC monetary policy meeting minutes. In other news. In Ukraine, Europe’s largest nuclear power plant narrowly escaped damage after shelling; Russian attacks intensify as weather deteriorates. Hong Kong leader tests positive for covid after meeting Xi Jinping. “Ordinary Germans are paying’: anti-war protests stretch across central Europe (FT). France needs to start reining in finances next year – IMF. Qatar signs 27-year deal with China to supply LNG. COP27 delivers climate fund breakthrough at cost of progress on emissions. In Currency markets. CNY hits 10-day lows & the US$ index strengthens as rising covid cases in China and spurs safe-haven buying. CNY weakens 0.65%, while Asian currencies slide 0.4% on average vs US$. Trading currencies come under fresh selling pressure with MXN & CHF fall 0.4%, NZD down 0.5%, NOK drops 0.7%, AUD weakens 0.8%, and JPY, SEK & ZAR tumble 0.95% vs US$.

Oil prices fall to near 2-month lows as expectations of greater covid restrictions increased demand concerns, alongside the strengthening US$ put pressure on oil prices. C$ weakens through 1.34 triggered by rising covid cases across China putting further selling pressure on oil prices and saw investors returning to the safe-haven US$. Expect C$ to steady near current levels as investors shift focus to Tuesday’s CAD Retail Sales and BoC’s Rogers speech. Support resets to 1.3375 while resistance rises to 1.3475.

EURCAD weakens as risk off sentiment and a bearish EBC put additional selling pressure on the Euro. Support lowers to 1.3700 while resistance resets to 1.3815.

Euro weakened on increasing risk-off sentiment and a dovish ECB. Risk off sentiment intensifies on surging covid cases across China triggered a surge in US$ safe-haven buying by investors. German Producer Price Index disappointed falling significantly below expectations. Going forward, ECB Lane’s dovish remarks and disappointing PPI added further selling pressure to the Euro. Expect markets to consolidate near current levels as investors focus on Wednesdays FOMC minutes. Support lowers to 1.0190 while resistance resets to 1.0300.

GBPEUR strengthens as disappointing German PPI & dovish ECB comments added further selling pressure to the Euro. Support remains at 1.1450 (.8733) while resistance holds at 1.1600 (.8620).

GBP battles to hold 1.1800 as the US$ dominates in early trading. China suffered several covid related deaths on the weekend, prompting concerns of increased covid restrictions, triggering an increase in risk-off sentiment. The pound is vulnerable to further weakness after last week’s UK Autumn budget failed to improve investor confidence amid recession warnings. Focus will be on today’s BoE’s Cunliffe speech of indications the banks next steps. Support resets to 1.1770, while resistance lowers to 1.1900.