Tuesday 27th December, 2022

The US$ weakens, oil prices firm, equity markets strengthen, while US yields are mixed as China reopens to the world. The US$ retreats, while stocks are buoyed by the news that China will scrap quarantine for international travelers starting January 8th, in an essential end of zero covid policy. China said it would improve visa arrangements for foreigners to enter the country and to allow Chinese citizens to travel overseas. Today US Housing Price Index will be in focus today. In other news. China to step up financial support to covid-hit catering, tourism sectors. Taiwan to extend conscription to one year, citing rising China retreat. Southwest cancels 70% of flights while air travel disruptions ease elsewhere. Moscow to Kyiv: meet Russia’s demands or we will impose them says Russia’s foreign Minister. In Currency markets. Risk sentiment improves as China ends zero covid restrictions putting pressure on the US$ and helping commodity currencies rebound. CNY is flat, while Asian currencies firm 0.1% on average vs US$. Trading currencies are mixed with ZAR falls 0.6%, JPY down 0.35% while NOK firms 0.1%, MXN, NZD & AUD are up 0.25%, CHF strengthens 0.5%, SEK rallies 0.6% vs US$.

Oil prices continue to firm hitting a 3-week high as China continues to ease covid restrictions and as US energy production slows on inclement weather. C$ strengthens in early trading as risk-on sentiment improves on news that China will scrap its final covid barrier to reopening by ending quarantine restrictions on foreign travelers. While markets remain thin with the holidays, we expect C$ has room to strengthen further vs US$. Support at 1.3510, if breaks look for a retest of 1.3425 next while resistance lowers to 1.3600.

EURCAD eases as Canada benefits from higher oil and commodity prices. Support holds at 1.4440 while resistance remains at 1.4634 (Feb 4th highs).

Euro rallies in early trading amid improving risk sentiment. Euro gapped higher in early trading capitalizing on broad-based US$ weakness as risk flows dominate on China’s further reopening. Expect markets to remain thin due to Christmas holidays as markets focuses on upcoming US data. Support holds at 1.0560 while resistance holds at 1.0715.

GBPEUR remains under pressure weakening vs Euro as ongoing strikes keeps pressure on UK economy. Support resets to 1.1250 (.8888) while resistance lowers to 1.1400 (.8772).

GBP remains under pressure despite improving risk sentiment. The UK markets are closed in observance of Christmas Day. The pound fails to hold on to early gains from the China driven risk-on sentiment and a weaker US$ as investors remain wary of UK investment. Ongoing strikes continue to pose a significant growth risk for the UK economy which continues to keep selling pressure on the pound. Support lowers to 1.2000, while resistance resets to 1.2130.