The US$ weakens, oil prices hold steady, equity markets rally, while US yields dip as inflation concerns ease. BofA’s forecast headlined saying, US 10-year real yields turned positive for the first time since March 2020, signaling a potential return to the pre-pandemic normal – “Our forecasts points to inflation peaking in Q2 and falling steadily into 2023”. Intraday focus will be on the French presidential election debate, the increasing Russian military aggression in eastern Ukraine and on the economic calendar with CAD inflation, US Existing Home Sales & Fed’s Daly + Evan’s speeches. In other news. The UK is expected to have the slowest growth of G7 nations in 2023, says IMF. US Stock futures drop after Netflix warns on subscriber numbers (FT). New surrender deadline in Mariupol as the west promises Ukraine more arms. A growing majority of swedes backing joining NATO, opinion poll shows. The currency markets. JPY fell to a fresh 20-year low vs US$ as Japan’s low interest rate policy & high commodity prices keeps pressure on the JPY. US$ Index fell sharply as US treasury yields came under pressure. CNY hits a 6-month low, GBP rebounds ahead of BoE speech and ZAR remains under pressure as power cuts highlights economic concerns. CNY falls 0.25%, while Asian currencies are up 0.2% on average vs US$. Trading currencies rebound with MXN up 0.25%, CHF strengthens 0.4%, NOK higher 0.7%, JPY & NZD firmed 0.85%, and AUD rallies 1%, while outlier ZAR falls 0.3% vs US$.
Oil edges firmer as supply concerns continue over the prospect of Russian sanctions, falling stockpile levels and China’s economy coming back online. The C$ strengthens on the back of higher oil prices and more importantly the weakening US$. Intraday Canada’s inflation report for March with markets expecting an increase to 6.1% which is an increase from Feb at 5.7% and could offer clues on the BoC policy outlook. Support resets to 1.2520 if breached look for 1.2477 next, while resistance lowers to 1.2625.
Euro rallies through 1.0850 on the weakening US$. Euro capitalized on the broad selling pressure surrounding the US$. The Euro found additional support from ECB policymaker Kazaks comments that a rate hike was possible as soon as July. The French elections will be in focus today as Macron improves in the poll’s vs Le Pen heading into a key economic debate tonight. Intraday with no key US data releases markets will remain to focus on US treasuries, French election, and Ukraine war updates for direction today. Support rises to 1.0790, while resistance resets to 1.0880.
EURGBP firms on the ECB comments of a possible rate hike as soon as July. Support resets at .8254 (1.2115) while resistance lowers to .8375 (1.1940).
GBP advances ahead of BoE comments and a weakening US$. The US$ remains the primary driver for the pounds short-term rebound, breaking its 4-day losing streak. Investors are look for signals in direction on interest rates from BoE Governor speech on Thursday after last week’s 30-year spike in inflation levels. The IMF forecast for British GDP growth in 2022 were cut to 3.7% down from January’s forecast of 4.7%, while growth in 2023 has been slashed to 1.2% from 2.3%. Also on Thursday, lawmakers will vote on whether PM Johnson should be referred to parliament’s privileges committee for an inquiry. Support holds at 1.2980 while Resistance remains at 1.3080.