Monday November 7th, 2022

The US$ weakens, oil prices are flat, equity markets rally, while US yields are mixed as investors await US election & inflation report. The US$ eases as investors looked ahead to a week filled with the Congressional midterm elections, more Fed speech, as well as the latest US consumer inflation report. Commodity prices came under some pressure as after Chinese authorities said the nation will ‘unswervingly’ adhere to the current covid-zero policy. Today sees a light US economic docket with focus on Fed’s Collins, Mester & Barkin speeches. In other news. Chinese exports fall for the first time since 2020. COP27; US works on plan for companies to fund emerging nations’ fossil fuel switch. Ukraine warns of more attacks on infrastructure, as mayor urges Kyiv to prepare for the worst. British minister to meet Taiwan president, drawing China’s anger. China posts 6-month high covid count as it sticks with covid-zero strategy. Singapore’s GIC, partner to buy Canadian REIT summit for C$4.46bln. In Currency markets. The US$ index slumps in early trading as risk-on sentiment improves despite China’s stance on covid-zero policy. CNY weakens 0.6%, while Asian currencies are flat on average vs US$. Trading currencies are mixed JPY down 0.1%, AUD & NZD eases 0.15%, NOK weakens 0.2%, while MXN is flat, ZAR firms 0.25%, CHF is up 0.35%, and SEK strengthens 0.6% vs US$.

Oil prices are stable, holding below US$100 a barrel as support from a weaker US$ & improving Chinese crude imports are offset by demand concerns from China’s stringent covid-zero policy. C$ holds steady below 1.3500, mirroring oil prices as markets balance a weaker US$ as risk-sentiment improves, but the Loonie is stalled from strengthening on the prospect of weaker oil demand. Intraday expect markets to remain stable as markets are stalled with limited economic data releases today. Support resets to 1.3450 while resistance lowers to 1.3590.

EURCAD bounces off November lows as improving risk sentiment benefiting Euro as oil prices stall. Support resets 1.3380 while resistance remains 1.3525.

Euro retests parity on a weakening US$. Euro extending recovery towards parity vs US$ amid an improving risk sentiment on Fed downsizing interest rates. The ECB governing council member Villeroy de Galhau said that the ECB was not far from the neutral ray, beyond which the pace of rate increases become more flexible. In the absence of any high-impact macroeconomic data releases from the US today, we expect the US$ to remain near current levels. Support resets to .9920 while resistance rises 1.0030.

GBPEUR rebounds aggressively as focus shifts to Nov 17th UK budget while the Euro remains sidelined. Support holds at 1.1435 (.8745) while resistance remains at 1.1550 (.8658).

GBP rebounds on a weaker US$, extending gains above 1.1450. The pound extends gains through 1.1450 on the combination of a weaker US$ as risk-sentiment improves and anticipation that UK Chancellor will announce his strategy to bear down on inflation as he sets his budget on Nov 17th. Chancellor Hunt is expected to announce GBP 60 billion worth of tax hikes and spending cuts in his budget next week. Intraday expect markets to remain within current trading ranges with the absence of any key US economic releases. Support resets to 1.1400, while resistance rises to 1.1520.