Monday October 31st, 2022

The US$ strengthens, oil prices weakens, equity markets are mixed, while US yields rise ahead of a busy week of earnings and key central bank rate decisions. Major currencies declined in early trading as markets anticipate another 75bps rate hike by the Federal Reserve this week. US 10-year yields rose to 4.06% after surging 9bps on Friday. Yields on UK gilts also advanced ahead of what could the Bank of England’s biggest interest-rate hike in more than 30-years. The Dow is up 14.4% in October, on track to be its best month since 1976. Wheat prices soared after Russia pulled out of a grain-export deal. European natural gas fell as unseasonably warm weather reduces demand and eases concerns about shortages for the winter. Gold is heading for its 7th straight month of declines, its longest losing streak since the 1960s. Today, US Chicago Purchasing Managers’ Index & ECB Lane speech. This week; Tuesday Australia RBA Interest Rate Decision, Wednesday Fed Interest Rate Decision, Thursday Bank of England interest rate decision, Friday US Nonfarm Payrolls. In other news. European inflation spikes to 10.7% yoy Oct. Brazil, Lula wins the president election in historical comeback. US to deploy B-52 bombers to Australia as tensions with China mount. OECD tax chief warns of trade wars if global deal is not implemented. Trade rift between EU and US grows over green industry & Jobs, France says it will lose Euro 8Bln as businesses are given incentives to ‘Buy American”. In Currency markets. CNY & Asian currencies under pressure after weak Chinese factory activity data. US$ firms as markets focus on the upcoming Fed rate decision on Wednesday. CNY tumbles 0.65%, while Asian currencies drop 0.3% on average vs US$. Trading currencies are mixed with NZD up 0.1%, while AUD & NOK slip 0.15%, CHF down 0.25%, MXN & SEK fall 0.4%, JPY weakens 0.55% and ZAR tumbles 1% vs US$.

Oil prices come under selling pressure following weaker-than-expected factory activity data out of China and on concerns its widening covid curbs will curtail demand. C$ weakens in early trading as oil prices ease and markets turn their attention to the Federal Reserve interest rate decision on Wednesday. With a light economic docket today, we expect to see C$ hold within contained trading range. Support resets to 1.3580 while resistance holds at 1.3680.

EURCAD firms on a stronger than expected EU inflation report, while weakening oil prices keeps the loonie on the backfoot. Support holds at 1.3480 while resistance steadies at 1.3600.

Euro stalls around .9950 after mixed EU data. EU annual inflation spiked to 10.7% in October vs 9.9% in September, while EU GDP came in as expected at 2.1%. Markets appear to be ignoring the EU data and remain focused on this weeks Fed interest rate decision which continues to support a stronger US$. Intraday focus will be on ECB’s chief economist Lane speech for signs of ECB’s next steps on interest rates. Support holds at .9890 while resistance resets to .9990.

GBPEUR slips in early trading as markets remain cautious ahead of the delayed UK fiscal plan. Support resets to 1.1550 (.8655) while resistance remains at 1.1700 (.8547).

GBP remains under pressure ahead of key central bank rate decisions this week. The pound retested 1.1550 as investors favor the US$ as markets gear up for the critical Fed & BoE rate decisions this week. Weaker than expected factory activity in China and the UK’s looming fiscal plan is keeping the pound under selling pressure. Support resets to 1.1500, while resistance holds at 1.1600.