The US$ strengthens, oil prices steady, equity markets firm and US yields stall ahead of US Retail Sales report. The US$ index tests its highest levels since July 2020 ahead of the October Retail Sales which is expected to increase by 1.5%, boosted by early holiday shopping and higher gasoline prices. The Sino/US summit suggest talks were focused on strategic & fundamental issues and avoided tariffs/trade issues, so had little impact on markets. Alongside the US Retail Sales report, markets will focus on US Industrial Production and two Fed policy makers speeches for intraday direction. In other news. President Biden raises Human Rights and warns of a Taiwan ‘red line” in his 3-hour summit with Chinese President XI. Evergrande Chief is freeing up funds from luxury assets as his company scrambles to pay debts. Russian gas flows to Germany rise despite Belarus threat. NATO warns Russia over Ukraine military buildup. BoE Governor Bailey says he is ‘very uneasy’ about inflation. UK Johnson says he would use Article 16 appropriately if needed. Covid. The US CDC raises covid travel warnings for Czech Republic, Hungary & Iceland due to rising covid cases. Germany imposes restrictions on unvaccinated people as covid cases and deaths spike. Italy plans mandatory third jabs for health workers. In currency markets. Turkish Lira hits new lows down 2% to 10.24 vs US$ ahead of another expected rate cut. Russian RUB falls 0.6% under pressure from geopolitical fears. CNY and Asian currencies dip 0.1% on average vs US$. Trading currencies struggle with JPY, ZAR & AUD down 0.1%, NZD drops 0.4%, while MXN & NOK edge 0.1% higher vs US$.
Oil prices firm in early trading on tight inventories, but rising covid cases is expected to impact demand and will likely limit oil price gains. OPEC chief commented that he sees oversupply into 2022, warning that OPEC members will have to be cautious when they review their output policy. C$ holds steady within its current range as it balances oil price concerns, a firming US$ and BoC Governor’s comments that Canada’s economy is moving close to full capacity. Intraday US Retail Sales, CAD Housing Starts report and BoC & FED speakers will be providing direction to currency markets. Support rises 1.2485, while resistance holds at 1.2599, if breached look for 1.2647 next.
Euro continues under selling pressure dropping below 1.14 vs US$. Domestically EU GDP came out as expected, while EU employment beat expectations. French and Italian inflation levels came out at, and better than expectations. The ECB remains resistant to rate hikes which will keep Euro vulnerable to further weakness vs its peers. ECB VP de Guindos said the bank will focus on maintaining favourable financing conditions, despite acknowledging that the current phase of inflation could last longer than expected. US Retail Sales will direct intraday direction, but with the prospect of a Fed, BOE & BOC rate hikes expect Euro to remain under pressure. Support resets to 1.1335 while resistance falls to 1.1435.
EURGBP tumbles further after the BOE hawkish comments, suggesting a rate hike as he is ‘very uneasy’ about the inflation outlook. Support resets at .8400 (1.1905) while resistance remains at .8525 (1.1730)
GBP tests 1.3470 after hawkish BOE comments and stronger jobs data. BoE Governor Andrew Bailey said he was ‘very uneasy’ about the inflation outlook and that his vote to keep interest rates on hold earlier this month, but the vote had been a very close call. The ILO Unemployment rate beat expectations dropping to 4.3%, while the claimant count fell 14.9k. Brexit issues continue but optimism remains despite the UK PM’s comments that he would use Article 16 if it was appropriate. Intraday US data will drive direction but expect GBP to remain firm vs its non-US$ peers. Support resets to 1.3380, if breached look for 1.3187 (Dec2020) next, while resistance holds at 1.3460.