Thursday December 1st 2022

The US$ continues weaker, oil prices edge higher, equity markets rally while US yields ease amid improving risk sentiment. The US$ slipped to 3-month lows while equity markets rallied, buoyed by the Fed Chair Powell confirming that the pace of interest rate hikes was set to slow starting in December and signs from China that it is softening its covid-zero stance. Today sees a full economic docket including US initial jobless claims, Core Personal Consumption Expenditures price index, Manufacturing PMI, CAD Global Manufacturing PMI & central bank speakers including ECB Lane, Fed Bowman and BoJ Kuroda. In other news. Global factory activity shrank in November – EU PMI slight downturn – China PMI shows contraction – Japan & South Korea activity shrinks. EU weigh lowering Russian oil price cap level to $60, with members trying to find a common position before the G7. Heaviest Ukraine fighting rages in east, NATO seeks to sustain support against Russia. The House passes legislation to avert a rail shutdown with a largely bipartisan vote. In Currency markets. Currency markets rebound and the US$ drops to a 3-month low on Fed Powell remarks on Fed slowing. GBP hits a 16-week high; CNY hits a 2-week high while all commodity currencies improve with signs of China easing its covid policies. CNY up 0.1%, while Asian currencies firm 0.2% on average vs US$. Trading currencies improve with MXN & CHF firm 0.1%, AUD up 0.2%, NZD strengthens 0.8%, while JPY rallies 1.25% vs US$ while outlier ZAR tumbles 1.5% on political uncertainty.

Oil prices extends gains on the combination of China easing covid restrictions, OPEC+ possibly cutting supply and the weakening US$ on Fed Chair Powell’s comments. C$ rebounds from its lows of 1.3600 to retest 1.3400 after the Fed’s signaled slowing rate hikes and we remain optimistic that the loonie has room to strengthen further on China’s easing covid policy. Investors will focus on today’s CAD Manufacturing PMI and Friday’s Unemployment rate ahead of next week’s BoC rate decision. Support lowers to 1.3370 while resistance resets to 1.3480.

EURCAD extends gains over 1.4000 as C$ lags its G7 peers. Support holds at 1.3930 while resistance steadies at 1.4050.

Euro holds gains above 1.0400 ahead of US data. Euro continues to trade in positive territory above 1.0400 supported by FOMC comments and China’s changing covid stance. Focus shifts to Octobers US PCE inflation data and November Manufacturing PMI data which will help provide intraday direction. Heading into 2023 we see Euro stalling on any rallies towards 1.06 as rising energy costs will have a greater impact on the single currency. Support rises to 1.0380 while resistance resets to 1.0500.

GBPEUR rallies as investors favor the pound over Euro on UK political stability and uncertainty for Euro heading into winter. Support rises to 1.1580 (.8635) while resistance resets to 1.1700 (.8547).

GBP extends gains hitting fresh multi-month highs. The pound alongside the JPY benefited the most from the Fed & China’s comments with the GBP hitting its highest levels since August. UK government stability, BoE remaining hawkish on rates and a general US$ weakness is helping investor confidence return to the pound. Intraday a flurry of key US data ahead of Fridays NFP will drive market direction. Support rises to 1.2070, while resistance resets to 1.2200.