Wednesday December 22nd, 2021

The US$ slips, oil prices edge higher, equity markets are up, while US yields are mixed ahead of the US GDP report. A cautious mood is providing an underlying support to the US$ ahead of today’s US GDP, US Consumer Confidence data and President Biden’s speech. The US GDP (annualized) is expected to hold steady at 2.1%, while President Biden’s speech will be watched closely any updates on his build-back-better economic plan. Expect to see the US$ remain supported into the holidays as Omicron concerns will support safe-haven currencies. In other news. Equity markets firm slightly with investors optimistic about a limited Omicron fallout. President Putin says Russia has ‘nowhere to retreat’ over the Ukraine standoff. The Kremlin disagrees with the US allegations Russia is violating WTO rules. Covid. Israel plans to give a second booster (4th covid shot) for seniors. The US plans 4 million doses of covid treatments in January. A report states the risk of catching Omicron at least doubles if you travel by plane. Singapore suspended its quarantine-free travel, while Australia renewed its vaccination push to a surge in Omicron variant cases. In currency markets. Turkish lira at 12.5 vs US$ holding on to its gains, ZAR remains under pressure on Omicron concerns and the US$ index consolidates ahead the US GDP report and President Biden’s speech. CNY is flat, while Asian currencies are down 0.1% on average vs US$. Trading currencies are mixed with JPY down 0.15%, ZAR falls 0.3%, while AUD is up 0.1%, NZD & MXN firm 0.2% and NOK strengthens 0.4% vs US$.

Oil prices are steady as Omicron caution lingers, dampening investor sentiment as more countries increase travel curbs into the Christmas holidays. C$ is finding support from firmer oil prices and Tuesday’s upbeat Canadian data which showed Retail Sales rising by 1.6% in October. Focus shifts to US data, oil and omicron updates which will provide direction to the loonie. C$ remains vulnerable to further weakness as market risk sentiment is likely to ease into thinner holiday markets. Support holds at 1.2880 and resistance remains at 1.2963 (2021 high), if breached look for potential 1.3141 (Nov 2020)

Euro stalls around 1.13 vs US$ amid deteriorating EU consumer sentiment. The EU Commission showed that the consumer sentiment deteriorated with the index falling to -8.3 vs -6.8 in Nov. Domestically increased lockdowns and the ECB’s policy to keep rates unchanged will continue to overshadow the Euro’s ability to strengthen in thinning holiday markets. Bias remains to sell Euro on rallies. Support at 1.1250 and resistance at 1.1350.

EURGBP continues weaker as Brexit optimism and the UK holding off lockdowns is providing support to the pound. Support at .8440 (1.1848) with resistance at .8600 (1.1628)

GBP extends beyond 1.33 after positive UK GDP data. The pound grinds higher, breaching 1.33 after the UK GDP expanded by 6.8%, beating expectations alongside increasing Brexit optimism. The Irish PM positive comments that Brexit talks were on track for progress, while UK new Brexit minister Truss put a bit of a damper on the mood saying UK negotiations were unchanged. If the UK holds off covid new restrictions, we expect to see the pound maintain current levels. Support at 1.3240 and resistance resets 1.3330.