Tuesday February 1st, 2022

The US$ weakens, oil is flat, equity markets are up, and US yields are mixed as risk-on tone grows. The US$ weakens for a 2nd day after hitting a 19-month high on Friday as caution from several US Fed Reserve policymakers about how many interest rate hikes will follow an expected first hike in March. Intraday US Manufacturing PMI and US JOLTS Job Openings will help provide direction to the US$ today. In other news. US stock markets has worst January since the global financial crisis as investors recoil over the prospect of rising interest rates. Ukraine crisis remains in focus with the US & Russia clashing at the UN and the UK & US threatening sanctions for Moscow elite. UK house prices show strongest start to year since 2005, up annually 11.2% in January. Covid. Hong Kong posts its highest daily of unlinked covid cases as the government struggles to contain community transmission. In Canada PM Trudeau tests positive for covid. In the US Joe Rogan apologizes following Spotify COVID misinformation controversy. In currency markets. Russian RUB rallies almost 1%, while the Turkish Lira weakens 0.5% and commodity currencies extend gains. CNY is up 0.1%, while Asian currencies are flat on average vs US$. Trading currencies are stronger across the board with JPY up 0.4%, MXN, NZD & AUD firm 0.55%, CHF & NOK strengthens 0.7% and ZAR rallies 1% vs the US$.

Oil prices hold near US$89pb, just off its 7-year high on speculation that OPEC+ could increase supply at its meeting this week, and on expectations that US inventories will increase. C$ extends gains with oil prices remaining at near 7-year highs, the equity markets rebound, strong CAD yields and the US$ remaining under selling pressure. Intraday US data and CAD GDP and CAD Manufacturing PMI will help provide direction to the loonie. EurCad, Scotiabank sees the potential of a test of 1.38-1.40 in coming months. Support resets to 1.2647, if breached we could see 1.2557 next, while resistance lowers to 1.2740.

Euro extends gains as risk-on sentiment keeps pressure on the US$. General US$ weakness is helping Euro rebound towards 1.13 level. Domestically German, Swiss & Italy’s retail sales missed expectations, while unemployment across the EuroZone improved slightly. Intraday US data will help provide direction to currency markets, while the ECB Monetary Policy Decision Thursday remains the Key focus for investors this week. Bias remains to sell euro on rallies on expectations the ECB will keep rates unchanged in 2022. Support resets to 1.1220 while resistance at 1.1300.

EURGBP is flat holding near multi-year lows as investors focus on the BoE & ECB rate decisions this week. Support holds .8280 (1.2077) while resistance remains at .8400 (1.1905)

GBP retests 1.35 vs US$ amid positive UK data and rising risk sentiment. The has pound surged over 100bps in the last 24 hours as the US$ remains under pressure and investor confidence growing that PM Johnson will survive “party-gate”. Domestically UK Manufacturing PMI beat expectations showing strong growth and UK house prices show strongest start to year since 2005, up annually 11.2% in January. Thursday’s BoE Interest rate decision remains the key focus for markets, with investors speculating on a 2nd rate hike from the bank. Support resets to 1.3420, while Resistance rises to 1.3535.