Wednesday April 13th, 2022

The US$ is steady, oil prices firm, equity markets are mixed, while US yields rise as inflation concerns dominate markets. On Tuesday the US inflation rate hit 8.5% a 41-year high, today UK inflation rate hits 7% a 30-year high, Fed official Bullard says it’s ‘fantasy’ to think modest rate rises will tame inflation. In Russia President Putin says peace talks with Ukraine is at a ‘dead end’, while the US Pentagon to meet top arms makers to discuss stepping up aid to Ukraine. President Zelenskyy offers prisoner swap for recently captured pro-Russian politician Medvedchuk, while over 3000 criminal proceedings are opened against the Russian military. Intraday CAD BoC interest rate decision, US PPI and Ukraine updates will help provide direction to currency markets today. In other news. Top economists’ forecast a EU ban on Russian energy would spark ‘sharp recession’ in Germany. Global renewable power prices soar on heavy demand, supply chain issues and soaring prices of parts & labor. Diversifying supply chains from China ‘probably good for everyone’ – World Bank Chief. The currency markets. The US$ index holds near 2-year highs on hawkish Fed rate comments. NZ raises interest rates by 50bps to 1.5%, the most in 22 years to tackle soaring inflation. GBP tested its lowest level since Nov2020, CNY steadies ahead PBOC rate decision and JPY hits 20-year lows vs US$. CNY & Asian currencies are flat on average vs US$. Trading currencies continue under pressure with NZD tumbling 1.1%, NOK weakens 0.65%, AUD & JPY fall 0.5%, while CHF is flat and outlier MXN & ZAR are up 0.2% vs US$.

Oil prices edge higher after President Putin commented that peace talks hit a dead end which renewed supply concerns. The IEA said it expected Russian oil output losses to average 1.5 million bpd in April, with losses extending to 3 million bpd in May. C$ holds near 4-week lows despite a +7% rise in oil prices this week as investors prefer the US$ on hawkish Fed comments. Intraday BoC is expected to raise interest rates by 50 basis points after Canadian inflation levels spiked to 40-year highs in March. Markets will be focused on BoC governors’ comments following the expected rate hike. Support holds at 1.2560 while resistance remains at 1.2675.

Euro continues to slip as the US$ remains the dominate currency for investors. The Euro has fallen 6.6% since November, holding near 2-year-lows vs the US$ due to the ECB’s static rate policy, the Ukraine war and the French Presidential elections uncertainties concern investors. The US March CPI report hit 40-year highs prompting more hawkish Fed interest rate comments which continues fuel US$ buying. Intraday US PPI, French presidential & Ukraine updates for direction for the Euro. Support lowers to 1.0780, while resistance resets to 1.0880.

EURGBP holds steady after the pound rebounds from near 18-month lows as stronger-than-expected UK inflation report prompted speculation of further BoE rate hikes. Support holds at .8300 (1.2048) while resistance remains at .8425 (1.1869).

GBP bounces off Nov2020 lows on expectations of further BoE rate hikes. The stronger-than-expected UK CPI report showed inflation levels spiked to 30-year highs prompting speculation BoE will raise interest rates at its next meeting. Domestically PM Johnson & his chancellor to be fined and apologizes over lockdown parties, reviving the possibility of him facing a no confidence vote. Intraday US PPI report and Ukraine updates will help provide direction to the pound today. Support holds at 1.2955 while Resistance remains at 1.3070.