Thursday May 19th, 2022

The US$ slips, oil prices are lower, while equity markets are US yields are down as markets remain risk averse. The equity market rout continues amid growing concern that high inflation is impacting corporate performance. Wall Street had its worst day since mid-2020 on Wednesday after warnings from some of the world’s largest retailers underscored just how hard inflation is impacting earnings. Intraday markets will be focused on the ECB policy meeting accounts, US Jobless data, Philadelphia Fed Manufacturing Survey and Fed Kashkari speech for direction. In other news. German Chancellor Scholz downplays fast-tracking EU membership for Ukraine. At the G7 meeting ministers are expected to focus on the immediate effects of Russia’s war in Ukraine and the covid pandemic. Google’s Russian unit to file for bankruptcy after seizure of bank account. More Ukraine fighters surrender in Mariupol, Russa says. Some in Shanghai allowed out to shop, the end of covid lockdown in sight. China warns the US again on strengthening ties with Taiwan. The currency markets. US$ index weakens as major currencies recouped from Wednesdays sell off. Euro firms as focus shifts to ECB tightening, ZAR strengthens ahead domestic rate hike decision, while AUD & NZD rebound as Shanghai eases lockdown restrictions. CNY slips 0.1% while Asian currencies are up 0.15% on average vs US$. Trading currencies firm with ZAR up 0.2%, JPY & MXN firm 0.35%, while AUD & NOK strengthen 0.7%, and NZD & CHF rallies 0.95%

Oil prices extend losses on increasing fears of a global economic slowdown. Russian production recovers some losses in May, the EU unveils Eur 210 bln plan to quit Russian energy and the US crude stockpile fell unexpectedly as refiners start to ramp up. C$ recovers after Wednesdays equity rout which saw a run to the US$, but as markets settle the US$ eases and C$ returns to the 1.28 support level. Intraday equity markets, US data and CAD Industrial Product Price and New Housing Price index will help provide direction today. Support holds at 1.2770, while remains at 1.2865.

Euro recoups losses as focus shifts to the ECB minutes. Euro is struggling to break above 1.05 after yesterday’s rout which saw the Euro plunge through 1.04 vs the US$. Markets have stabilized as focus shifts to the ECB April policy meeting as investors look for insight on possible rate increases in June and September. Euro will likely remain capped on rallies as risk perception will remain the primary driver for the single currency into the summer. Support resets to 1.0480, while resistance remains at 1.0550.

EURGBP is flat as markets wait for the ECB minutes for rate direction in 2022. Support holds at .8400 (1.1905) while resistance remains at .8500 (1.1764).

GBP rebounds from intraday lows of 1.2340 on strong industrial orders. UK showed that industrial orders at a record-setting pace in May, which helped the pound rebound despite an ongoing risk-aversion tone in the markets. The UK is the 5th biggest global economy which continues to grapple with surging inflation, slowing growth and the worst cost of living crisis in 30-years. We anticipate the pound to continue under pressure and has the weakest outlook among all the major currencies in 2022. Support resets to 1.2350, while Resistance holds at 1.2450.