The US$ rebounds, oil prices dip, equity markets US yields are mixed as risk sentiment cools amid Omicron and geopolitical concerns. A Japanese study showed Omicron is 4.2 times more transmissible in its early stage than the Delta variant. Geopolitical concerns are impacting investor confidence as US/NATO allies discusses possible Ukraine related sanctions, US passes a bill to target China over the oppression of Uyghurs Muslims as well as increased US/Iran tensions. Intraday focus will be on the US initial jobless claims after the US Jolts Jobs Opening surprised markets after hitting +11m vs Sept’s 10.4m. Expect currency markets to consolidate today ahead of Friday’s US inflation report and next week’s key Fed interest rate decision. In other news. US President Biden to hold talks with NATO allies over the Ukraine situation. Lithuania braces for a China-led corporate boycott after China tells multinationals to sever ties or face being shut out of Chinese markets. A deal to avert a US default by raising the debt limit faces a test in the Senate today. Covid. The UK implores people to obey the new covid rules including mask wearing & work from home, while falling short of a lockdown. The WHO says people with health issues or inactivated vaccine should get covid booster. Denmark plans new restrictions including closure of restaurants, bars and schools while China halts group tourist trips. In currency markets. Euro is steady, Chinese CNY eases from 3 ½ year highs and Turkish Lira weakens 2% as Erdogan endorses low rates. CNY dips 0.35% while Asian currencies are down 0.2% on average vs US$. Trading currencies are mixed with safe haven JPY up 0.2% while NZD dips 0.25%, AUD & MXN weaken 0.35% and NOK & ZAR tumble 1% vs US$.
Oil prices slip as several governments reimpose restrictions to limit the Omicron spread which is expected to impact demand into 2022. C$ pulls back from hits highest levels since Nov at 1.2609 after the BoC’s cautious tone over Omicron and weakening oil prices. The BoC kept key interest rates on hold at 0.25% as expected, it maintained its guidance for a rate hike in April, while highlighting the BC floods and the emergence of the Omicron variant could hinder economic activity. Focus today will be on US initial jobless claims and BoC Gravelle speech but expect markets to remain contained within current ranges ahead of Friday’s US Inflation report. Support resets 1.2635 and the resistance holds at 1.2690 if
breached look for 1.2745 next.
Euro continues to pivot on 1.13 amid dovish ECB headlines and omicron concerns. Concern that the ECB is looking to increase its bond purchases at its meeting next week, while the FED is expected to taper and look at raising rates highlighting the divergence between the central banks. Domestically more EU countries reimpose a variety of covid restrictions, increasing concern over Ukraine and continuing negative interest rates will likely continue to cap the Euro’s ability to strengthen in the short term. Support resets 1.1265 and resistance rises to 1.1345.
EURGBP holds near 3-month highs as Omicron concerns casts doubt of a BoE rate hike and Brexit concerns adds further pressure on the pound. Support at .8440 (1.1848) with resistance at .8600 (1.1628)
GBP remains under pressure amid Omicron restrictions, Brexit and a cautious BoE. The UK falls short of lockdown restrictions as it reimposes mask restrictions and some work from home orders. Brexit continues as France says it will fight for every 100 pending UK fishing license as EU deadline looms on Friday. The prospect of a BoE rate hike next week is fading amid Omicron uncertainties which puts additional pressure on the pound. Support resets to 1.3133 with resistance lowers to 1.3240.