Tuesday November 15th, 2022

The US$ weakens, oil prices dip, equity markets are mixed, while US yields fall as risk sentiment improves. Investors return to the global equity markets, encouraged by an easing in Sino-US tensions and improving confidence that the Federal Reserve will be able to slow its hiking pace. Markets were encouraged by Vice Chair Brainard who said on Monday it would probably be “appropriate soon to move to a slower pace of increases.” Currency markets strengthened vs US$, US yields slipped on Brainard comments, while oil prices remain under pressure from rising covid cases across China. In Asia Japan’s economy unexpectedly shrank in Q3/22, as well as softer than expected Chinese retail sales data, highlighted risks for global growth. Today US PPI & CAD Manufacturing Sales & Wholesale Sales, as well as Fed’s Cook speech will help provide intraday direction. In other news. G-20 nations to condemn Russia’s Ukraine invasion as Foreign Minister Lavrov watches on (CNBC). China’s covid frustration spark unrest in Guangzhou as cases rise (Reuters). Spanish truckers start new strike over freight rules, cost of living. Australia PM welcomes dialogue with China’s Xi in first meeting since 2016. Trump expected to announce 2024 US presidential bid from Mar-a-Lago (FT). In Currency markets. The combination of improving Sino-US ties and the prospect of slowing Fed hikes helped improve risk-on sentiment and put pressure on the US$ vs all major currencies. CNY up 0.45%, while Asian currencies are up 0.25% on average vs US$. Trading currencies improve with CHF firms 0.3%, JPY up 0.5%, ZAR gains 0.7%, SEK strengthens 0.9%, AUD, NOK & NZD rally 0.95% while outlier MXN dips 0.1% vs US$.

Oil prices remains under pressure on a combination of a cut in OPEC’s 2022 global demand forecast and the rising covid cases in China offsetting worries about tight supply. C$ strengthens in early trading vs US$ on improving risk sentiment but lags its currency peers due to falling oil prices. Intraday more Fed speech, US PPI and to a lesser extend CAD Manufacturing & Wholesale sales will help provide intraday direction. Support resets to 1.3225 while resistance lowers to 1.3370.

EURCAD strengthens on the combination of weaker oil prices and better than expected EU data. Support rises to 1.3770 while resistance resets to 1.3885.

Euro rallies through 1.0400 to fresh multi-month highs. Improving risk sentiment helped the Euro rally to its highest levels since July. EU GDP came in as expected, while German & EU ZEW economic sentiment improved. The combination of China’s positive meeting with the US at the G20 and the Fed suggesting US rates could be close to pivoting has helped boost risk sentiment across the currency markets. Support resets to 1.0380 while resistance rises to 1.0500.

GBPEUR are flat as markets await Thursday UK budget announcement. Support resets to 1.1330 (.8826) while resistance remains at 1.1525 (.8677).

GBP rallies through 1.1800 despite weaker than expected UK data. The pound is benefiting from the improving risk sentiment, as investors ignore the UK unemployment rate rising to 3.6% in September. Intraday markets will be monitoring Fed Cook’s comments and US PPI report for intraday direction. In the bigger picture investors remain focused on Thursday’s Key UK budget for the pounds next direction. Support resets to 1.1780, while resistance rises to 1.1900.