Tuesday March 7th, 2023

The US$ is steady, oil prices are flat, while equity markets and US yields are mixed ahead of Fed Powell’s testimony. Equity & currency markets are muted as Fed Chair Powell heads to Capitol Hill for two days testimony and investors await his latest comments on the state of the US economy. In China stocks slipped as weak trade data raises slowdown fears. In the US, Treasuries holds below 4% ahead of two days of Fed testimony. Today sees a light US economic docket leaving investors fully focused on Fed’s Chair Powell testimony.

In other news. Meta plans thousands more layoffs as soon as this week. PM Trudeau orders review of alleged Chinese election interference. Ukraine fends off drone attacks as Russia makes slow gains (WSJ). China warns of potential conflict with US over containment strategy, Foreign Minister Qin Gang calls on Washington to commit to ‘Guardrails’ around Taiwan. Japan destroys new rocket minutes after lift-off, a significant blow to the country’s space plans.

In Currency markets. The US$ index is steady heading into the Fed Chair’s testimony. AUD is the weakest performer today after the RBA raised rates to the highest level in a decade to 3.6%, while at the same time the central bank softens its hawkish tone. China’s weak trade data puts pressure on Asian currencies. CNY & Asian currencies slip 0.1% on average vs US$. Trading currencies are mixed with AUD tumbling 0.8%, SEK, ZAR & NOK falls 0.55%, CHF dips 0.2%, JPY & MXN slip 0.1%, while NZD firms 0.1% vs US$.

Oil prices hold steady as Russian supply worries offset China demand uncertainty. C$ remains on the back-foot vs the US$ as investors remain on the sidelines heading into the Fed Chairs testimony and the BoC rate decision on Wednesday. We anticipate that the C$ still has room to weaken vs US$ with the BoC expected to keep interest rates steady while the Fed is expected to maintain its hawkish tone. Support holds at 1.3540 while resistance remains at 1.3650.

EURCAD holds steady near 2023 highs as markets await the BoC rate decision. Support resets to 1.4380 while resistance rises to 1.4550.

Euro remains range bound, capped towards 1.0700 ahead of Fed Powell’s testimony. Selling pressure remains towards 1.0700 as investors remain cautious and the US$ improves heading into the Fed chairs testimony today & tomorrow. In today’s testimony Powell will likely be asked whether January data which showed an uptick in US inflation & the impressive grow in nonfarm payrolls will call for additional pricing steps. Support holds at 1.0580 while resistance remains at 1.0700.

GBPEUR holds steady into the first day of Fed Chair Powell’s testimony. Support holds at 1.1250 (.8888) while resistance remains at 1.1400 (.8772).

GBP drops back towards 1.2000 amid risk-off sentiment ahead of Fed chairs testimony. The pound remains under pressure as investors remain focused on the direction of global interest rates. BoE Mann said that the pound could face further downward pressure if investors have not fully priced in hawkish messages from US Fed & the ECB. Brexit concerns returns after the DUP seeks a month-long consultation on the post-Brexit deal. Today all eyes will be on the Fed Chairs comments. Support holds at 1.1950 while resistance resets to 1.2060.