September 27th Morning Update

The US$ is higher, oil is up, equity markets mixed and US yields higher. The strengthening of the US$ came on the back of Powell’s hawkish message while market participants anticipate a rate hike in 2022. Debt ceiling continues to cast a shadow and could negatively affect the US$. While the Evergrande crisis seems to have been digested by the market, the Chinese are now faced with a self-imposed power crunch. In an effort to cut emissions prior to the Olympics and show their seriousness in de-carbonizing the economy, factories are being ordered to curb activity or — in some instances — shut altogether. US to release Durable Goods later this morning. In other news, NATO expansion in Ukraine crosses red line for Putin. South Korea urges North to restore hotlines for any talks a day after the North repeated an offer to open conditional talks COVID, Japan to lift state of Emergency at the end of the month. Sydney lockdown to end sooner for the vaccinated. Singapore reports highest number of cases since the beginning of the pandemic. New Zealand to start a pilot program of home isolations for travelers. In currency markets, People’s Bank of China (PBOC) comments headlines. 1. Keep liquidity reasonably ample. 2. Safeguard rights and interest of housing consumers. 3. Push real lending rates to further fall. 4. Vow to ensure a healthy property market development.

Bullish oil prices continue to support the Loonie and might keep a lid on any short-term weakness. Huawei CFO Meng Wanzhou’s release is an opportunity for Canada and China to normalize ties. Market to focus on US Durable Goods later this morning. Support remains at 1.2625, while resistance holds at 1.2720.

Germany’s Social Democrats will start the process of trying to forge a three-way alliance and lead a government after they narrowly won Sunday’s national election. Scholz, who was finance minister is hoping to form a coalition before Christmas. Market focusing on Lagarde speech and US figures.  Support resets to 1.1683, while resistance moves to 1.1755.

Tight German election results prompted some selling of EURGBP. The UK fuel crisis could limit the move lower. Support holds at .8500 (1.1765) while resistance resets to .8600 (1.1628) if breached look to .8650 (1.1560).

GBP/USD has been under pressure as a petrol shortage threatens the UK. UK’s environment minister said that there is no shortage of petrol, but trucker shortage seems to be the cause. Prime Minister Boris Johnson suspended rules relating to hiring foreigners and is contemplating sending the army to help. Support holds at 1.3660 and while resistance resets at 1.3775.