Thursday November 17th, 2022

The US$ strengthens, oil prices weaken, equity markets are down, while US yields rise as Fed speakers dampen risk sentiment. Risk sentiment eases as stronger-than-expected US economic data and a raft of Fed speakers dampened expectations the Federal Reserve could end its rate-hiking cycle earlier than expected. San Francisco President Daly said a pause in rate hikes was “off the table”, and NY President Williams said the Fed should avoid incorporating financial stability risks into its considerations. Today UK Chancellor Hunt delivered his budget, US Housing Starts, Initial Jobless Claims, Philadelphia Fed Manufacturing Survey and more Fed speeches will help provide intraday direction to markets. In other news. Russia launches more missile strikes, fighting rages in east Ukraine. France & Germany to fire up stalled fighter jet project (FT). Republicans win US House majority, setting stage for divided government (Reuters). G20 Spat with Trudeau upsets Xi’s choreographed return to limelight (FT). China’s southern manufacturing city Guangzhou struggles to rein in record covid outbreak. In Currency markets. The US$ index rebounds against a basket of currencies as Fed adopts a more hawkish tone. GBP eases into the government budget announcement. CNY weakens as new covid cases spur worries over lockdowns. CNY tumbles 1%, while Asian currencies weaken 0.5% on average vs US$. Trading currencies come under fresh selling pressure with JPY down 0.3%, MXN & CHF are down 0.55%, NZD weakens 0.8%, AUD falls 1% and SEK & NOK tumble 1.3% vs US$.

Oil prices fall on easing geopolitical tensions and increasing demand worries as new covid cases increase in China. C$ continues to weaken against the US$ as Fed speakers increase hawkish tone and warn that the Fed is not ready to pivot its current hiking stance. Domestically the BoC is expected to be less aggressive on future rate hikes as CAD inflation levels improve. Intraday US data release will be the primary driver for intraday direction. Support rises to 1.3300 while resistance resets to 1.3430.

EURCAD eases from Wednesdays high as CAD outperforms as focus shifts back to interest differentials come back into focus. Support holds at 1.3770 while resistance remains at 1.3860 if breached look for 1.3979 (March 31st).

Euro slips below 1.04 on easing risk sentiment and a strengthening US$. EU inflation eased slightly in October but holds near record highs at 10.6%. Europe new cars sales strengthen for a 3rd month, jumping 14% in November. Investors are cautious of recent ECB comments of balance sheet reductions and the case for implementing a less aggressive approach was gaining ground. Intraday US data and Fed speakers will be in focus. Support lowers to 1.0280 while resistance resets to 1.0400.

GBPEUR dips slightly as markets digests the UK Autumn budget announcement. Support remains at 1.1330 (.8826) while resistance holds at 1.1525 (.8677).

GBP comes under fresh selling pressure vs US$ after the UK budget is announced. UK Chancellor Hunt delivered his Autumn statement to tackle cost of living crisis. The Chancellor set out 3 goals of his budget being Stability, Growth and Public Services. The Chancellor expects a shallower downturn in the UK economy, lowers the highest tax bracket, announces tens of billions in tax rises and spending cuts. Expect the markets to remain fluid as it digests the budget details. Support holds at 1.1770, while resistance lowers to 1.1930.