Thursday January 20th, 2022

The US$ is steady, oil prices dip, equity markets and US yields are mixed ahead of US jobs data. The US$ index steadies after Wednesday’s correction as US yields eased, while currency markets are mixed going into the US initial jobless claims and Philadelphia Fed Manufacturing survey which will help provide intraday direction. The key event remains the Feds rate decision & Statement on the 26thJan which will be a key driver for the US$ in Q1. In other news. President Biden predicts Russia will ‘move-in’ on the Ukraine, while Brussels reassures US after French President Macron’s surprise call for EU-Russia talks. Secretary of State Blinken holds Ukraine talks with allies after President Biden’s comment ‘attack likely’. Chinese banks cut borrowing costs for a 2nd straight month after the central bank cut policy loan rates and pledged more easing to stabilize the economy. Covid. Banks in the UK ask staff to return to offices. Covid spreading like never before in America’s, health agency says. India’s richest state set to reopen schools as Omicron cases fall. In currency markets. Russian RUB falls almost 1% on geopolitical concerns, commodity currencies are mixed & CNY is steady despite rate cuts. CNY is flat while Asian currencies firm 0.1% on average vs US$. Trading currencies are mixed with NZD & NOK down 0.2%, JPY & CHF are flat, while MXN is up 0.15%, AUD firms 0.4% and ZAR rallies 0.9% vs US$.

Oil prices slip from their 7-year highs on profit taking, but strong demand and short-term supply disruptions continue to provide core support to oil prices. C$ failed to break through its 6-day high of 1.2451 as oil prices dip and the US$ consolidates on rising geopolitical concerns. Wednesday saw Canada’s annual inflation rate rise to 4.8% adding pressure to the BoC to raise interest rates. Bias remains to sell US$ looking for a stronger loonie into February. Support holds at 1.2450, if breached look for a test of 1.2383 (Nov 10th) while resistance resets to 1.2535.

Euro remains in a tight trading range with markets focused on ECB minutes. Euro remains capped below 1.14 vs US$ and near two-year lows vs GBP as the ECB refrains from raising interest rate. Focus will be on the ECB minutes today to see if it will shed new light on the prospect of rate hikes in 2022. The EBC President Lagarde up to now has suggested there will be no rate hikes, but refrained from outright dismissing the possibility of rate increases in 2022. Support resets to 1.1320, while resistance lowers to 1.1400.

EURGBP holds steady near its 2-year lows ahead of the ECB minutes while the prosect of a 2nd BoE rate hike remains high. Support holds .8280 (1.2077) while resistance remains at .8400 (1.1905)

GBP weakens on political and economic concerns. The UK PM said he will continue to fight for his job as the ‘party-gate’ scandal sees continued pressure for his resignation. A Bloomberg article commented that the UK is 2-months away from a cost-of-living crisis with soaring energy prices, rising inflation and the expectations the UK government will be raising taxes in April. Expect the pound to remain under pressure and US data will help drive intraday direction. Support holds at 1.3560 while resistance remains at 1.3640.