Tuesday January 10th, 2023

The US$ firms, oil prices are stable, equity markets are down, while US yields rise on hawkish Fed comments. Market optimism stalled as investors weighed hawkish comments from SF Fed President Daly who said she expects the central bank to raise rates to somewhere over 5%. Equity markets reversed while US yields rose as investors set their focus on the release of the US inflation report due on Thursday for clarity on the trajectory of US interest rates. Today sees a light economic docket so focus will primarily be on Fed Chair Powell’s speech for intraday direction. In other news. Goldman Sachs said they no longer predict an euro-zone recession after strong EU economic performance at the end of 2022, lower natural gas prices and from China’s reopening policy. The White House under pressure to expel Bolsonaro after Brazil riots. Russia pushes to capture Ukraine’s Soledar amid fierce fighting. China retaliates against South Korea covid curbs, says outbreak past peaks. US banks get ready for shrinking profits and recession; Goldman Sachs is cutting up to 3,200 employees this week as Wall Street sets for a tough year. New British law to blunt strikes to be introduced to parliament. In Currency markets. US$ steadies after recent slide on hawkish Fed comment. Currency markets stall ahead of the Fed Chairs speech today. CNY dips 0.15%, while Asian currencies are down 0.2% on average vs US$. Trading currencies are mixed with JPY & CHF down 0.1%, AUD & NOK slip 0.25%, ZAR falls 0.7% while CHF is flat, and NZD & MXN firm 0.15% vs US$.

Oil prices steady as expectations that further hikes in US interest rates will slow economic growth which has offset demand optimism. C$ holds steady below 1.3400 after testing a 6-week high 1.3358 as risk sentiment improved from the China reopening optimism. In focus today will be BoC Macklam and Fed Chair Powell who are speaking in Sweden today. Focus will be on the Fed Chair after Fed Daly’s hawkish comments of US rates to 5% in 2023. Support holds at 1.3314 (Nov 2022), while resistance remains at 1.3472.

EURCAD holds steady ahead of Fed Chair Powell’s speech today. Support resets at 1.4280 while resistance rises to 1.4440.

Euro holds steady balancing China reopening optimism vs US hawkish tones. Euro holds over 1.07 finding support from China reopening policy, optimism after Goldman Sachs drops its call for an EU recession while the ECB is expected to retain its hawkish tone. Focus will be Fed Chair Powell’s speech to see if he push’s back on Fed Daly’s hawkish comment or if he is in agreement. Support resets to 1.0660 while resistance rises to 1.0800

GBPEUR eases in early trading but remains within its current trading range ahead of BoE & Fed comments today. Support holds at 1.1250 (.8888) while resistance remains at 1.1400 (.8772).

GBP holds mid-range as markets steady amid a cautious market mood ahead of the Fed Chairs speech. The pound remains vulnerable to further weakness ahead speeches from BoE Bailey and Fed Chair Powell today amid increasing hawkish tones from other Fed officials. The UK announced its cut in its current energy aid to companies and will bring a new smaller support strategy in April. Following the Nursing, railway workers, ambulance drivers strike the government is looking to introduce new laws to blunt future strike actions. Today all focus will be on the Fed Chairs comments. Support resets to 1.2080 while resistance rises to 1.2200