The US$, oil prices, equity markets and US yields are all positive as markets await key US data today. The US economy is expected to have maintained a positive pace of growth in Q4/22, but momentum is likely to have slowed towards the end of year, as higher interest rates eroded demand. The US GDP growth is expected to have increased to 2.6% annualized in Q4, weaker than Q3 which posted growth at 3.2% annualized. Global equity markets got a boost after Tesla reported record revenues, Hong Kong tech stocks push benchmark to the highest levels since April. Today sees a flurry of key data releases, alongside US GDP, focus will be on Durable Goods Orders, US Initial Jobs Claims, Nondefense Capital Goods Orders, Personal Consumption Expenditures Prices, New Home Sales & Chicago Fed National Activity Index to provide intraday direction.
In other news. China says covid deaths, severe cases have fallen over 70% since peak. Explosions rock Kyiv as Russian missiles strike Ukraine. Lockheed ready with F-16s as Ukraine’s allies revive debate over fighter jets. Philippines records strongest growth in 45 years. Pakistan’s economy nears collapse as foreign currency reserves plunge. UK Business sentiment dropped to its lowest level 14-years. Italy’s PM Meloni belies radical image in cautious first 100 days. SAP to cut 3,000 jobs, explore Qualtrics stake sale.
In Currency markets. The US$ index holds just above 8-month lows with the Fed meeting next week remains in focus. ZAR is steady ahead of its rate decision. G10 currencies are stable heading into key US growth data. CNY slips 0.1%, while Asian currencies are up 0.1% on average vs US$. Trading currencies are mixed with SEK weakens 0.35%, MXN slips 0.2%, JPY down 0.15%, while CHF is flat, ZAR & NZD are up 0.1%, AUD & NOK firm 0.25% vs US$.
Oil prices firm after US crude stocks climbed less than expected, and heading into the looming EU ban on Russian refined products. C$ holds steady at its mid-point of the weekly range as markets stall heading into a flurry of key US economic data today. BoC statement suggested that if the economy plays out as the bank expects, the implication is that 4.5% is the top of current rate cycle. Intraday US data will drive direction to currency markets. Support holds at 1.3305 while resistance remains at 1.3425.
EURCAD is steady heading into key US growth data. Support holds at 1.4500 while resistance remains at 1.4685.
Euro continues to straddle 1.0900 vs US$ ahead of US GDP. The US$ is consolidating near 8-month lows amid weaker treasury yields and a less hawkish Fed. Euro investors remain on the sidelines despite a hawkish ECB and improving domestic data as investors are waiting for the Fed comments next week on their direction for interest rates in 2023. Intraday we could see increased volatility if we get any data releases outside of estimates. Support holds at 1.0800 while resistance remains at 1.0950.
GBPEUR is sidelined as investors await key US data. Support holds at 1.1300 (.8850) while resistance remains at 1.1450 (.8733).
GBP struggles to sustain momentum ahead of US growth data. The pound is benefiting from the weakening US$ vs positive UK data. The institute of chartered accountants in England & Wales said that its latest monitor of business sentiment index dropped to -23.4, the weakest level since 2009. We expect the pound to remain capped ahead the Fed & BoE rate decisions next week. Domestically the UK economy remains under pressure, as recession concerns dominate medium term investor confidence. Support holds at 1.2280 while resistance resets to 1.2450.