Wednesday February 16th, 2022

The US$ weakens, oil prices firm, equity markets & US yields are mixed as Russian-Ukraine tensions continue. A cautious tone remains in the markets as Investors weigh conflicting statements as Russian pull-out meets NATO skepticism, and the Ukraine defense website is still hacked. Intraday, alongside the ongoing Ukraine situation markets will be focused on the FOMC minutes and US retails sales to provide direction to the currency markets. In other news. UK inflation climbs to its highest level since 1992 at 5.5%. The ECB warns the property market is a “key vulnerability” for eurozone banks due to rise in remote working. Republican boycott of Raskin nomination vote spells more limbo for Fed rule changes (Reuters). Covid. Canada is scrapping pre-arrival covid PCR tests requirement for fully vaccinated travelers. In the US Disney is dropping its face mask mandate. Hong Kong confirms 4,285 new covid cases a new daily record; President XI calls for HK to contain covid outbreaks raising prospect of wider lockdowns. In currency markets.  The US$ weakens as safe-haven buying eases, GBP firms as inflation hits 30 year highs, while RUB firms vs US$. CNY if flat, while Asian currency firm 0.1% on average vs US$. Trading currencies are mixed with JPY down 0.05%, while NOK is flat, NZD, MXN & CHF are up 0.15%, and AUD & ZAR firm 0.3% vs US$.

Oil prices recoup losses as investors weigh conflicting statements and Russian-Ukraine tensions remain high. C$ strengthens breaking through 1.27 level as oil prices strengthen 1%, and the US$ weakens despite continue uncertainty over the Ukraine crisis. Intraday has the potential to see increased volatility with Ukraine updates, the FOMC Minutes, US Retail Sales and the CAD inflation report. Bias remains for C$ to extend gains vs US$. Support resets to 1.2634, while resistance lowers to 1.2735.

Euro edges higher on the weakening US$. Euro edged cautiously higher as uncertainty remains over the Ukraine situation but while the market tone improves, investors are keeping on the sidelines ahead of the US Retail Sales and FOMC minutes. Intraday Euro will be driven by Ukraine updates and US economic releases. Expect Euro to be capped around 1.1425 vs US$. Support resets to 1.1335 while resistance holds at 1.1425.

EURGBP is flat as markets ignore the UK’s spike in inflation and the expectations of a BoE hike, preferring to focus on Ukraine and the US economic releases. Support holds at .8370 (1.1905) while resistance remains at .8500 (1.1765)

GBP edges higher on strong data releases, expectations of a BoE rate hike ahead of US data. UK economic releases all beat expectations with UK CPI hit 5.5% (yoy-Jan) the highest level in 30 years, Retail Price index spiked to 7.8% and UK Core PPI output rose to 9.9% (yoy-Jan). The pound is capped by ongoing Ukraine concerns and investors keeping to the sidelines ahead of the US data releases and FOMC minutes today. Bias remains for further GBP strength particularly vs Euro. Support holds at 1.3485, while Resistance holds 1.3585, if breached look for 1.3640 next.