Thursday November 24th, 2022

The US$ eases, oil prices weaken, equity markets are up, while US yields slip after the Fed minutes. Risk sentiment improved after the Federal Reserve meeting minutes showed support for more moderate interest rate increases even as some underscored the need for a higher terminal rate. We anticipate markets will be somewhat sidelined today with no US economic releases and US equity markets closed with the US Thanksgiving holiday. In other news. China’s covid infections hit record highs and economic outlook darkens. European council president to visit China next week for a summit with Xi (FT). China, Evergrande creditors ask chairman for $2bln fund infusion-Bloomberg. Measles now an imminent global threat due to pandemic, say WHO & CDC. Brazil’s electoral court rejects Bolsonaro election challenge. In Currency markets. US$ tests near 3-month lows after a less hawkish Fed minutes. Billionaire investor Ackman bets HKD peg can break. ZAR steadies as market await another rate hike from its central bank. CNY & Asian currencies are up 0.2% on average vs US$. Trading currencies are mixed with ZAR & SEK, NOK, CHF down 0.1%, while AUD & MXN are up 0.1%, NZD firms 0.25% and JPY rallies 1% vs US$.

Oil prices steady in early trading but faces further price challenges as EU considered a higher-than-expected price cap on Russian Crude and signs of a global slowdown increased. C$ edges higher vs US$ despite weaker oil prices as investors focused on the Fed minutes which signaled that the pace of US interest rate hikes could slow. Expect markets to consolidate today with the US Thanksgiving holiday. Support lowers to 1.3310 while resistance resets to 1.3415.

EURCAD stalls near 8-month highs with both currencies expected to consolidate with the US holidays. Support holds at 1.3750 while resistance remains at 1.3900.

Euro capped at 1.0450 as markets consolidate with the absence of US data. Euro extended gains in early trading testing a 9-day high vs US$. German IFO business climate improved helping to provide support to the single currency. ECB de Guindos said on Wednesday “it is very likely that we will see negative growth rates in Q4 in the Eurozone”. German Central bank stated, “the inflation rate could stay in double digits also beyond the turn of the year.” The bearish underlying sentiment will likely keep the Euro capped in the medium term. Support rises to 1.0330 while resistance resets to 1.0450.

GBPEUR turns positive vs Euro up 0.35% in November, looking set to retest October highs. Support remains at 1.1550 (.8658) while resistance holds at 1.1700 (.8547).

GBP holds onto gains with a softer US$. The pound has rallied 5.5% in November vs US$, retesting 4-month highs on a combination a less hawkish Federal Reserve, improving domestic data and an improving confidence of governments autumn budget. Going forward focus will swing back to the BoE next rate decision and the ongoing Brexit negotiations. Expect markets to consolidate within current trading range with the absence of the US markets. Support resets to 1.2035, while resistance rises to 1.2130.