Thursday January 19th, 2023

The US$ eases, oil prices weaken, equity markets are down, and US yields ease on investor concern. Risk sentiment wanes after optimism over China’s economic reopening is beginning to fade as data releases signal slowdowns in the rest of the world economies. Wednesdays disappointing US retail sales and a weaker than expected PPI reading ignited recessions fears, sending global equity markets lowers. The US Treasury yields fell to their lowest levels since September, oil prices slipped near 1% and the US$ eased from intraday highs. Today, focus remains on Davos Summit, EUR ECB Monetary Policy Meeting Accounts, US Building Permits, Jobless claims, Philadelphia Fed manufacturing and CAD Wholesale Sales will help provide intraday direction to markets.

In other news. NZ PM Ardern to step down as New Zealand PM no later than early February and will not seek reelection. France hit by nationwide strike as unions fight Macron’s pension reform. China says critical covid cases have peaked as lunar holiday travel surges. US, Germany head for showdown over tanks for Ukraine when leaders meet on Friday.

In Currency markets. CNY remains under pressure on covid fears. US$ safe-haven eases from intraday highs, NZD weakens on PM resignation news and AUD weakens on soft jobs data. CNY falls 0.6%, while Asian currencies are down 0.3% on average vs US$. Trading currencies are mixed NZD tumbles 0.9%, AUD weakens 0.8%, MXN falls 0.4% NOK slips 0.25%, while CHF is flat, JPY firms 0.35%, and SEK strengthens 0.6% vs US$.

Oil prices extend their losses after a surprise jump in US crude stocks and heightened fears of a recession after Wednesday’s disappointing retails sales data. C$ steadies near 1.35 after weakening on the combination of the decline in Canadian producer prices on Wednesday and increasing global recession fears putting pressure on commodity prices. Markets anticipate the BoC take a less hawkish stance with expectations the bank will hike 25bps next Wednesday. Intraday US data will continue to drive intraday direction. Support resets to 1.3435 while resistance rises to 1.3540.

EURCAD extends gains after weak CAD data and weakening commodity prices and supported by a hawkish ECB. Support resets to 1.4550 while resistance rises to 1.4685.

Euro holds near 1.0800 as focus shifts to the ECB President & ECB minutes. Euro holds at its mid-point of this week’s range despite rising recession fears and Ukraine ahead of anticipated spring offensive. The ECB’s continuing hawkish narrative that it supports more rate hikes to tame inflation continues to provide an underlying support for the Euro. Support holds at 1.0780 while resistance remains at 1.0900

GBPEUR slips heading into the ECB minutes and the central banks continued hawkish comments. Support holds at 1.1300 (.8850) while resistance remains at 1.1450 (.8733).

GBP the pound steadies below 1.2350 as risk-off flows caps the pound’s ability to strengthen. The pound looks vulnerable to further weakness from ongoing labor disruptions, continuing Brexit deadlock and investors remaining on the sidelines as risk-off sentiment increases. Domestically inflationary pressured eased slightly, but the extent of the decline is not sufficient, and we anticipate the BoE will be required to continue to push interest rates higher. Support resets to 1.2280 while resistance remains at 1.2400.