Thursday December 30th, 2021

The US$ rebounds, oil prices slip, equity markets are mixed and US yields dip as covid concerns increase. The US$ index rebounds, equity markets end their 7-day winning streak and oil prices recede as Omicron cases globally sets a new daily record. Intraday year-end ‘book’ adjustments, US initial Jobless Claims, Chicago Purchasing Managers’ Index and covid updates will provide direction to currency markets today. In other news. Presidents Putin and Biden to speak today amid ongoing Ukraine tensions, setting the stage for senior officials to hold security talks in Geneva on Jan 10th. The UK house prices jumped another 1% in December capping its biggest full year rise since 2006. Covid. The WHO warns of a ‘tsunami of cases’ from Omicron & Delta variants. US CDC says covid deaths and hospitalization ‘comparatively’ low despite Omicron surge. Belgium makes a U-turn to allow theatre’s, cinemas to reopen. Xian battles its biggest covid outbreak by a Chinese city in 2021. In currency markets. The US$ continues to seesaw between gains & losses in thin holiday trading, increasing covid concerns and capital markets closing 2021 books. CNY dips 0.05%, while Asian currencies are mixed with INR, MYR & THB up 0.3% and KRW, TWD, SGD & IDR are down 0.15% on average vs US$. Trading currencies are also mixed with JPY down 0.15%, while MXN & ZAR are flat, NZD is up 0.1%, AUD firms 0.25% and NOK falls 0.5%

Oil prices slip on a combination of demand concerns related to covid restrictions and China cutting its import quotas. C$ holds steady, finding support as crude prices remain close to fresh December highs on positive demand expectations for 2022. Covid concerns remain high as nearly every province set new record cases as Omicron continues to sweep across the country. Bias to sell US$ on rallies as Canadian vaccination/booster rates remain high, anticipation BoC rate increases, and oil expectations remain positive into 2022. Support holds at 1.2750 and resistance remains at 1.2850.

Euro remains volatile in thin holiday trading. Euro recedes from intraday highs amid a dampening risk mood and a firmer US$ on safe haven buying. ECB Knot commented he sees a good chance inflation across the EU will hold above 2% beyond 2022. Intraday Omicron updates and US economic releases will provide intraday direction. Support at 1.1250 and resistance at 1.1350.

EURGBP weakness continues and sets new support levels on BoE/ECB interest rate policy divergence and limited UK covid restrictions continuing to support the pound. Support lowers to .8375 (1.1940) while resistance resets at .8550 (1.1695)

GBP bounces off 1.35 amid thin & choppy holiday markets. The pound tested its highest levels in a month hitting 1.3505 but retreated heading into US economic releases. The UK house prices jumped another 1% in December to 10.4% y/y, capping its biggest full year rise since 2006. Intraday expect volatility to continue as year end book squaring and thin holiday trading.Support resets to 1.3430 and resistance rises to 1.3505.