The Morning Update

The US$ is steady, oil prices weaken, equity markets are down, while US yields are mixed as risk sentiment wanes. Equity & commodity markets remain under pressure, depressed as sticky inflation spurred concerns that global central banks will maintain their interest rate hiking policies. Fed's Williams said US inflation is slowing, but levels still too high. The Fed's monthly Beige book survey released on Wednesday showed the US economy "stalled" with narrow access to credit. Investors expect the Fed will hike a further 25bps in May and then pause rate hikes into the Summer. Bank of China kept its prime rates unchanged after the Peoples bank of China stayed put. Today sees a flurry of Fed speakers, more US earnings, ECB Monetary Policy Meeting Accounts, ECB Lagarde speech, US initial Jobless Claims, Philadelphia Fed Manufacturing survey, & BoC Governor Macklem speech will all help provide direction to intraday currency markets.

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In other news. Tesla missed profit expectations with net income and earnings dropping more than 20% from last year. NATO chief visits wartime Ukraine ahead of counter-offensive. German producer prices rise less than expected in March. Treasury Secretary Yellen to warn China against 'unfair' economic practices. McCarthy sets out Republican demands for averting debt ceiling crisis. Sudan's warring generals; rival strongmen signal fight to the end (FT). EU prepares emergency curbs on grain imports from Ukraine, bowing to pressure from Poland & other eastern European states.

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In currency news. The US$ steadies after strong US bank results, firmed by expectations that the Fed will keep monetary policy tight through Q2. CNY holds steady after benchmark loan rates left unchanged. The pound finds support in the face of continuing high inflation levels. CNY & Asian currencies are up 0.1% on average vs US$. trading currencies are mixed with NZD weakening 0.45%, MXN & NOK fall 0.3% while JPY is flat, AUD, ZAR & SEK are up 0.1%, and CHF strengthens 0.25% vs US$.

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Oil prices remain under selling hitting 3-week lows on a firmer US$ & rate hike expectations which outweighed lower US crude stocks. C$ weakens to 1-week lows as risk sentiment eases on expectations of further global central bank interest rate hikes as inflation levels remain high, while in Canadian inflation levels which have fallen supporting the BoC decision to keep interest rates on pause. Weakening commodity prices, increasing interest rate divergence between BoC & other global central banks is likely to keep pressure on the loonie in Q2. Today, focus will be on Fed speakers, US data and BoC Governor Macklem speech will help provide intraday direction to currency markets.

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EURCAD continues to edge higher up nearly 1% in April as markets wait to hear BoC & EBC leaders comments today for signs of direction to their respective interest rates. Support holds at 1.4760, while resistance remains at 1.4800.

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Euro steadies mid 1.09 as markets await the ECB's release of the Monetary Policy Meeting Accounts. Euro remains under pressure as risk sentiment eases, favoring the safe-haven US$. Markets are sidelined heading into Monetary Policy Meeting Accounts this morning, followed by ECB President Lagarde speech. The ECB is expected to maintain their narrative supporting the prospect of a rise in key rates by 25 to 50 bps at its next meeting in May. Today sees a busy US economic docket and a flurry of Fed speakers ahead of their black-out period before their May interest rate decision. Support lowers to 1.0900 while resistance remains at 1.1025.

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GBPEUR weakens in early trading taking the pound down 1.25% over the last 6-months vs Euro. We anticipate the pound will steady around current levels as high inflation levels supports further BoE rate hikes.

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GBP consolidates above 1.24 amid growing risk aversion. The pound edges towards daily lows as investors favor the safe-haven US$ amid souring market sentiment. Expectations of BoE rate hikes after UK inflation remained above 10% is providing some support to the pound in the short term. On going strikes, stagnating growth and the increasing prospect of recession exacerbated by increasing inflation levels & the prospect of further BoE rate hikes will weigh on the pounds ability to strengthen in the medium to longer term. Intraday US data a flurry of central bank policy makers will help drive intraday direction.

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