The US$ eases, oil prices firm, equities markets rise, and US yields slip into Super Thursday. Wednesday the Fed met market expectations by announcing tapering and set the stage for earlier, faster interest rate hikes as inflation soars. The US$ consolidated on the Fed announcement as investors switched their focus to the BoE who surprised markets by raising interest rates to 0.25%, focus shifts to the ECB interest rate policy decisions next. In the US, Initial Jobless claims, Housing Starts, Manufacturing & Service PMI data for intraday currency market direction. In other news. EU leaders weigh sanctions on Russia over Ukraine and Lithuania concerns. US Democrats struggled on Wednesday to find a path forward for President Biden’s US$1.75tn domestic investment bill. Chinese creditors sue Evergrande for claims totaling $13bn. Covid. France increases travel curbs with the UK over Omicron concerns. Denmark approves Merck’s covid pill for at-risk patients. Several UK hospitals struggle with staff shortages due to covid. US covid cases jump 60% since October. In currency markets. Turkish Lira sets another 2021 record high against US$ above 15 today. CHF is steady after its national bank kept rates on hold, while NOK firmed as its central bank raised its benchmark rate to 0.5% with more increases to follow. CNY is flat, while Asian currencies are up 0.1% on average vs US$. Trading currencies are mixed with JPY down 0.15%, while ZAR & MXN are up 0.1%, and AUD, NOK & NZD strengthen 0.5% vs US$.
Oil prices rebound +1% boosted by the Fed’s hawkish tone and news that US crude inventories dropped more than expected as demand surged. Cad rallies from its 4-month lows of 1.2936 vs US$ on a combination of a consolidating US$ & strengthening oil prices. C$ as a commodity currency is vulnerable to further weakness if China announces lockdown measures due increased Omicron cases. Intraday US economic releases & oil prices will provide direction to the loonie. Support resets 1.2710 while resistance lowers to 1.2835 if breached look for 1.2948 (2021 high) next.
Euro eases from 1.1320 intraday highs heading into the ECB rate decision. The ECB is expected to confirm the end of its Pandemic Purchase Emergency Program by March and expectations that rates will be kept on hold in 2022. The ECB may opt to ramp up its Asset Purchase Program to support the EU economic recovery in the face of the Omicron variant, this would be perceived as dovish and will likely have a negative impact on Euro. Support at 1.1205 and resistance holds at 1.1325.
EURGBP drops after the UK surprised markets with the BoE raising rates to 0.25%, focus remains on the ECB next. Support at .8440 (1.1848) with resistance at .8600 (1.1628)
GBP rallies after the BoE raises rates to 0.25%. The BoE surprises market by becoming the first major central bank to raise its interest rates since the start of covid. BoE commented that the Omicron variant may weigh on future growth and said its decision to raise rates was finely balanced with covid. We may see a buy the rumour sell the fact market which could see the pound retest its 2021 lows over ongoing concerns for UK PM leadership, Brexit, and growing Omicron cases. Support at 1.3220 and resistance holds at 1.3310.