Thursday June 30th, 2022

The US$ extends gains, oil prices are flat, while equity markets & US yields are down amid mounting recession concerns. Currency & equity markets came under renewed selling pressure after central bank chiefs call an end to an era of low rates, issues warnings on inflation and fueled concern of global recession. Fed Chair Powell and his EU & UK counterparts warned inflation is going to be longer lasting as they gathered at the ECB annual forum. Intraday investors will be focused on US PCE Inflation, Initial Jobless claims, Personal Income, Chicago Purchasing Managers Index and CAD GDP for direction today. In other news. German unemployment unexpectedly jumps on Ukrainian refugees. Turkey’s trade deficit hits record high on rising energy costs. Sweden doubles its rate-hiking pace (currently at 0.75%) suggesting interest rates could hit 2% by the start of 2023. In China, Disneyland Shanghai reopens with mandatory tests & mask required. US Stocks shed US$9tn in 2022 as Fed tightening spooks investors (FT). NATO summit wraps up in Madrid unveiling the biggest overhaul of the alliance since the cold war. The currency markets. Sweden hike interest rates 0.5%, while the SEK drops 0.4% vs US$. The US$ Index holds above 105, a fresh 20-year high vs a basket of major currencies. CNY firs as factory orders return to growth, but covid fears cap gains. Commodity currencies come under renewed selling pressure; NZD bounces off 2-year lows. CNY firms 0.1% while Asian currencies are mixed with THB, MYR, INR & IDR down 0.25% on average, as SGD and KRW strengthen 0.2% on average vs US$. Trading currencies are mixed with ZAR down 0.15%, NOK slips 0.25%, CHF weakens 0.35%, MXN falls 0.45%, while AUD & NZD flat, and JPY up 0.25%

Oil prices steady as fuel stocks counter ongoing supply concerns. OPEC enters its 2nd/final day of meetings with sources saying the group is unlikely to decide to pump more barrels to the market beyond August. C$ slips above 1.29 as global recession concerns puts pressure on commodity-based currencies. Canada is expected to outpace growth in other G7 countries in 2022 supported by surging oil, wheat, and metal prices. Intraday alongside US economic data releases markets will be focused CAD Gross Domestic Product data for April which is expected to drop to 0.3% vs 0.7% in March. Support resets to 1.2860 resistance rises to 1.2955.

Euro struggles to hold 1.04 as the US$ index hits a fresh 20-year high. Dovish comments from the FED, ECB & BoE at the ECB Forum squashed risk sentiment as global recession fears grew. Euro failed to recoup lost ground and is entering into the North American open looking vulnerable to retest 1.0350. Adding further pressure to the Euro was the unexpected fall in German employment which rose to 5.3% vs 5% which has been attributed to rising Ukrainian refugees. Bias remains for further Euro weakness with the potential of testing parity within 2022. Support resets to 1.0360 while resistance lowers to 1.0460.

EURGBP slips as GBP stalls while Euro came under selling pressure after German unemployment rises and growth concerns increase after the ECB forum comments. Support holds at.8560 (1.1682) while resistance remains at .8660 (1.1547).

GBP battles to maintain 1.2100 as safe-haven flows keeps pressure on the pound. Global recession fears were stoked at the ECB forum which saw investors revert to the safe-haven US$. UK domestic growth is expected to be the weakest of the G7 in 2022/23, Brexit issues are expected to come to ahead as the UK government attempts to breaks NI protocol agreements and uncertainty for the UK PM leadership will keep the pound under sustained pressure. Our bias remains bearish for the pound with expectations of a test of 1.2000, with a potential to extend towards 1.16 vs US$. Support lowers to 1.2085 while resistance lowers to 1.2165.