Thursday March 2nd, 2023

The US$ firms, oil prices edge higher, equity markets are down, while US yields are up on rate concerns. Equity markets are down while US 10-year yields topped 4% for the first time in 4-months as hawkish Fed rhetoric dulls risk-sentiment. Italy joins Spain, France & Germany with higher-than-forecasted inflation levels. Eurozone inflation printed higher-than-expected at 8.5% in Feb, while core inflation spiked to a record 5.6% in Feb vs 5.3% in January. Focus shifts to the ECB Monetary policy meeting as markets expect the ECB will continue its hawkish tone. Alongside the ECB focus will be on US jobs data, BoE’s Pill & Fed Waller speeches as well for intraday direction.

In other news. US Labor market shows signs of cooling (WSJ). Salesforce stock jumps on profit outlook. The West presses the UAE to clamp down on suspected Russian sanctions busting. US Seeks allies’ backing for possible China sanctions over Ukraine war (Reuters). Taiwan military to get $619m US arms boost as China keeps up pressure. US House panel approves bill giving President Biden power to ban TikTok.

In Currency markets. GBP eases after BoE Governor says “nothing decided” on future rate hikes. Euro eases after inflation levels rise across the Eurozone. Commodity & Asian currencies ease as Fed hawkish rhetoric damps risk sentiment. CNY falls 0.6%, while Asian currencies are down 0.45% on average vs US$. Trading currencies are under pressure with CHF & MXN slipping 0.15%, JPY & ZAR down 0.35%, AUD & SEK weaken 0.5%, and NZD & NOK tumble 0.7% vs US$.

Oil prices edge higher on China growth optimism, but rising EU inflation levels will likely impact further oil gains intraday. C$ weakens through 1.36 as expectations of widening interest rate gap with a dovish BoC vs a hawkish Fed could which could see further weakness in the Loonie in coming months. Today US jobs data will drive intraday direction. Support holds at 1.3540 while resistance remains at 1.3650.

EURCAD slips in early trading as higher oil prices provided some intraday support for C$. Support resets to 1.4380 while resistance rises to 1.4550.

Euro remains under pressure but holds above 1.0600 after EU inflation data. Euro steadies within 1.0600-1.0700 trading zone after Eurozone inflation came in higher than expected at 8.5%, while core inflation spiked to 5.6%. Despite the spike in EU inflation levels and expectations of higher ECB rates, the higher US rates will dominate investor attention. Today jobs data will be an intraday driver for markets. Support resets to 1.0580 while resistance rises to 1.0700.

GBPEUR holds steady ahead of ECB statement & BoE Pill speech today. Support holds at 1.1250 (.8888) while resistance remains at 1.1400 (.8772).

GBP drops below 1.2000 vs US$ on NI Protocol challenges & a hawkish Fed. The pound dropped below 1.2000 as investors focus on the details and challenges to the Brexit NI Protocol proposal. BoE Bailey speaking today sidelined his comments on further BoE rate direction, with Investors taking his non-comment as a sign of a 25bps rate hike at the March 23rd meeting. Today US jobs data and ECB rate statement will provide intraday direction. Support drops to 1.1900 while resistance resets to 1.2020.