The US$ eases, oil prices firm, equity markets and US yields rebound as risk appetite recovers. Markets rebounded in early trading as investors’ appetite for risk improved despite ongoing caution amid the rapid spread of Omicron globally. Markets will be focused US Senator Manchin reversal as he puts forward a proposal to support President Bidens US$1.75tn domestic investment bill. In other news. In the Moscow Times, Putin Warns of ‘Military-Technical’ Response to Western ‘Aggression’. US exporter venture Global & China Cnooc lock in a 20-year LNG contract defying tensions between the world powers. Turkish lira gyrates as President Erdogan vows ‘no going back’ on rate cuts. The SEC demands more risk disclosure for Chinese companies listing in the US. Covid. The US will deploy troops to help hospitals during the Omicron wave and will distribute 500 million free covid tests starting in January. Canadian Foreign Minister Joly tests positive for covid, while Quebec shuts bars, gyms, and casinos in response to rising covid cases. Moderna could be ready to develop Omicron booster in weeks. In currency markets. Turkish Lira volatility continues to make headlines as it rallied 25% vs US$ on Monday. Safe-haven JPY – US$ – CHF ease with risk-on sentiment returns. CNY & Asian currencies firm 0.1% on average vs US$. Trading currencies are mixed with JPY & MXN are down 0.1%, ZAR falls 0.5% while AUD firms 0.4%, NZD strengthens 0.55% and NOK rallies 0.7% vs US$.
Oil prices rise 1% as risk-on sentiment improves despite lingering Omicron worries. Into the holidays expect oil prices to remain vulnerable to further weakness as more countries consider new curbs to tackle surging Omicron cases. C$ set a new 2021 at 1.2963 on Monday and remains vulnerable to further short-term weakness as surging omicron cases continue to negatively impact commodity prices. Intraday CAD retails sales (mom-Oct) will be watched closely and is expected to hit 1% vs -0.6% in September. Support resets to 1.2880 and resistance holds at 1.2963 (2021 high), if breached look for potential 1.3141 (Nov 2020)
Euro holds below 1.13 vs US$ amid increased risk in quiet holiday markets. The Covid virus threat and increasing restrictions across Europe continues cap the Euro’s ability to strengthen. Expect currency markets to remain sidelined as investors focus on Wednesday’s key US GDP Q3 report for direction. Bias remains to sell euro on rallies. Support at 1.1225 and resistance holds at 1.1310.
EURGBP drops as Brexit optimism and the UK holding off lockdowns helped boost the pound. Support at .8440 (1.1848) with resistance at .8600 (1.1628)
GBP edges higher amid Brexit optimism, Omicron updates and the potential of lockdowns. The UK PM holds off initiating lockdowns but reserves the potential for increased lockdowns into Christmas. Brexit optimism grew after the Irish PM said UK – EU talks were on track for progress. No key economic releases today, expect the pound to hold within current ranges ahead of the US GDP report Wednesday. Support at 1.3205 and resistance resets 1.3300.