The Morning Update

The USD trades lower, equity markets are up, oil trades higher and us yields are slightly higher. US Initial Jobless Claims fell to their lowest level in nearly 1-1/2years suggesting tighter labor market conditions and tempering the odds for a March Fed rate cut. Congress passes stopgap spending measure to dodge Friday shutdown threat. Michigan consumer sentiment index to be released later today.

In other news. Netanyahu publicly rejects US push for Palestinian state. North Korea says it tested underwater nuclear attack drone in response to rivals’ naval drills. A Ukrainian drone attack on an oil depot inside Russia causes a massive blaze. US carried out it’s 5^th airstrike against Houthi targets in Yemen which led to a retaliatory attack on a US owned ship. Major shipping company have suspended all Red Sea and Suez route opting to sail around the continent of Africa delaying delays and supply bottleneck.

In currency news. The Red Sea unrest is significantly affecting Chinese export to Europe where the cost of a shipping a container more than doubled since the Houthi’s attack escalations. As we close out the week, the CNY is up 0.08%, JPY up 0.09%, MYR flat and TWD up 0.50% against the USD. The AUD is up 0.4% while the NZD is up by 0.07%. and 0.10% respectively. The trading currencies are mixed with the MXN is up 0.19% while the ZAR scaled back 0.24%.

In commodity markets.  Oil prices tick up as markets weigh Middle East tensions, supply forecasts. Oil is presently trading higher 0.5%, Nat Gas up 2.6%, Gold and silver are trading higher 0.31% and 0.2% respectively while copper is down 0.15%. Agricultural commodities are higher with Wheat and soybean up 0.50%.

The US$ continues to move in an upward direction against the C$ on the back of solid US economic data, coupled with the higher US Treasury yields. Higher oil prices is offering some support to the Loonie. On the Canadian economic datafront, retail sales are set to be released offering insight on consumer spending.

EURCAD is flat this morning in what has been a stable week for the currency pair.  

In her last of 3 appearances at the World Economic Forum in Davos, Lagarde said that inflation is coming down in the Eurozone and worldwide, and that there are signs the job market is loosening. Market participants will focus on US consumer sentiment set to be released later this morning.

The GBP/EUR pair is selling off this morning as UK reported weak retail salesfigure. Talk of an early UK rate cut as recessions fears deepens.

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The GBP fell sharply after the release of December’s retail sales, UK household spending contracted significantly as individuals faced the heavy burden of higher interest rates and consumer price inflation, which deepened the cost-of-living crisis.

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