Thursday March 9th, 2023

The US$ eases, oil prices steady, equity markets are down, while US yields are mixed in anticipation of higher US rates. The US$ holds near three-month highs, equity markets continue to retreat, and US yields hold near the key 4% levels as investors priced the likelihood of higher interest rates and expectations of a US recession. Fed Chair Powell on his 2nd day of testimony reaffirmed his message on higher and potentially faster interest rate hikes but told law makers no decision has been made on the pace of the next move in two weeks. Today sees a lighter economic docket, focus will be on US Jobless Claims and CAD BOC Rogers speech for intraday direction.

In other news. China consumer inflation slowed to the lowest rate in a year; producer deflation deepens. Credit Suisse to delay its 2022 annual report after a ‘late call’ from the SEC. Russia unleashes massive drone and missile strike on Ukraine: huge nuclear power plant loses power (CNBC). US President Biden wants to impose 25% minimum tax on billionaires. Georgia withdraws Russia-inspired bill after violent protests. France sees record protests as anger over President Macron’s Pension Plan persists.

In Currency markets. The US$ index steadies near 3-month highs, while CNY slips to a 3-month lows. ZAR stalls near 3-year lows as S&P announced that it had downgraded its outlook for South Africa. Turkish Lira hit a fresh record low of 18.9620 as investors weigh the economic impact of massive earthquakes that hit Turkey last month. CNY slips 0.1%, while Asian currencies firm 0.15% on average vs US$. Trading currencies improve with SEK up 0.3%, NZD, NOK, CHF, MXN & AUD firm 0.4%, and JPY rallies 0.9% vs US$.

Oil prices hold steady as fears over the economic impact of higher US rates are offset by the surprise drop in US Crude inventories and ongoing optimism for Chinese demand. C$ holds near 5-month lows, under performing its peers as a hawkish Fed puts pressure on commodity prices and increases the expected interest rate divergence between the BoC. The Bank of Canada kept interest rates on hold at 4.5% breaking with the Federal Reserve who is expected increase rates by ½% at their meeting, so we expect continued selling pressure on the loonie in the short-term. Support resets to 1.3745 while resistance rises to 1.3854 (Oct 21st).

EURCAD extends to fresh 2-month highs as markets balance a dovish BoC vs a hawkish ECB. Support resets to 1.4500 while resistance rises to 1.4600.

Euro struggles to strengthen beyond 1.0600 as risk-off sentiment continues. Euro made modest gains as the US$ slipped from 3-month highs after markets settle after two days of Fed Chairs testimony. Intraday US Jobless claims will be in focus ahead of Friday’s key US Nonfarm payroll report.  Support holds at 1.0480 while resistance remains at 1.0600.

GBPEUR holds steady as markets consolidate ahead of Fridays key US Nonfarm payroll report. Support lowers to 1.1200 (.8928) while resistance remains at 1.1400 (.8772).

GBP extends gains and retests 1.1900 is seen as a technical correction. The pound improved amid an easing US$, but expectations is that gains will be capped as investors focus on the divergence between the BoE & Fed interest rates. We expect the pound the be somewhat sidelined as investors focus shifts to Fridays key Nonfarm payroll report. Support holds at 1.1800 while resistance remains at 1.1970.