The US$ is steady, oil rallies, equity markets & US yields rebound as safe-haven assets remain in demand as Russian attacks on Ukraine cities intensifies. Oil prices spiked to US$113pb (8-year high) on supply disruptions and the US$ index extends gains as investors digest the negative impact of a prolonged Russian-Ukraine war on the global economy. Intraday Fed Chairs Powell testimony, US ADP Jobs data, ECB & BoE speeches, BoC rate decision and Ukraine updates will be monitored for their impact on currency markets today. In other news. The Ukrainian President says Russian talks may happen today. President Biden’s State of the Union address announced further sanctions on Russia and unveiled a new ‘unity agenda’. China will not join sanctions against Russia, banking regulators say. OPEC+ meets today and is unlikely to break from its current production plan. In currency markets. Russian Rub hit 107, down 44% YTD vs US$. Euro slides 1.2% MTD as investors worry about the Ukraine crisis impact on the EU economy. CHF hits a 7-year high vs EUR. CNY dips 0.1%, while Asian currencies weaken 0.15% on average vs US$. Trading currencies are mixed with CHF lower 0.1%, JPY, ZAR & NOK down 0.3%, MXN falls 0.45%, while AUD & NZD are up 0.15% vs US$.
Oil prices spike, Brent Crude peaked to US$113pb overnight as supply disruption concerns grow following increasing sanctions on Russia and traders seek alternative oil sources in an already tight market. Russia counts for 8% of the world’s oil supply, even if the west releases reserves, oil prices are likely to stay above US$100 as supply remains tight. C$ holds within 1.2650-1.2750 range as oil prices are offset by the continued flight to the safe-haven US$. Canada’s economy grew at 6.7% going into an expected BoC ¼% rate hike today, but markets reduce the odds to 80% that the bank will raise 5x’s in 2022 under the current geopolitical conditions. Intraday Fed Chair Powell speech, US Jobs & Ukraine updates could all impact the loonie today. Support remains at 1.2634, if breached look for a possible run to 1.2550, while resistance remains at 1.2755.
Euro dips below 1.11 despite a hot EU inflation report. Euro continues under pressure as the prospect of an ECB rate hike fades despite rising EU inflation levels. ECB De Guindos said it was too early to assess the full implications of the Ukraine/Russian crisis on the EU economy. Investors worry that a prolonged Ukraine/Russian war will increase energy costs, impact supply chain concerns and rising refugee levels will negatively impact the EU’s economy. Intraday the Fed chairs speech, US Jobs and ECB speakers will likely keep Euro under pressure. Support dips to 1.1080 (minor) with 1.1000 key, while resistance lowers to 1.1140.
EURGBP continues under pressure as Euro takes the full impact of the Ukraine crisis. Expect further EURGBP weakness as EU & BoE interest rates are expected to continue to diverge. Support holds at .8300 (1.2048) while resistance remains at .8400 (1.1905)
GBP rebounds above 1.33 as UK yields bounce. The GBP rebounds as investors continue to exit the Euro as markets worry about the impact to the EU on a prolonged Ukraine/Russia war. There is no high tier UK economic releases so markets will be focused Fed Chairs testimony and US jobs to provide direction to the currency markets. Support resets to 1.3365, while Resistance lowers to 1.3380.