Wednesday February 9th, 2022

The US$ weakens, oil prices dip, equity markets are up, while US yields fall as market sentiment improves. Optimism that the Russia – Ukraine crisis will not escalate helped improve market risk-on sentiment. The major currencies continue to trade within relatively tight ranges as markets remain focused on Thursday’s key US inflation report estimated up 7.3%. Intraday with the absence of high-impact data releases investors will focus on the 10-year US Treasury note auction and comments from Fed’s Mester speech for direction. In other news. AP Moller-Maersk expects supply chain problems to ease in the 2nd half of 2022. President Macron says Putin promises not to ‘escalate’ Ukraine crisis (FT). Russia may use field hit by US sanctions for gas exports to China. Covid. The WHO says the new omicron BA.2 sub-variant will rise globally, but it’s unclear if it can reinfect people. UK PM Johnson indicates covid restrictions to be lifted by the end of February. New York to drop the indoor mask mandate. In currency markets. US$ index weakens helping boosting commodity currencies, while GBP & EUR remain within tight trading ranges. CNY up 0.05% while Asian currencies are firm 0.2% on average vs US$. Trading currencies firm with JPY & ZAR up 0.1%, CHF, NOK & MXN are stronger 0.3%, AUD firms 0.5% and NZD rallies 0.6% vs US$.

Oil prices dip slightly but overall remain steady as risk sentiment offsets the prospect of Iranian oil coming online. US indirect talks with Iran will resume in Vienna on Tuesday with still a number of vital issues to be ironed out. C$ continued to fluctuate within 1.2650-1.2750 range despite oil prices holding above US$ 90pb. On Tuesday Canada posted a trade deficit of C$137m far below expectations and disappointing markets. Intraday BoC’s Governor Macklem speech will be monitored closely for signs of future interest rate hikes. Support holds at 1.2647, while resistance remains at 1.2740.

Euro holds steady within 1.1400-1.1450 range. Markets remain sidelined pending Thursday’s US inflation report, intraday with the absence of any key data releases we expect Euro to maintain its current range. Adding some pressure to the Euro was ECB De Galhau comments that the market reaction to the ECB’s January policy meeting may have been too strong. Support holds at 1.1365 while resistance remains 1.1450.

EURGBP is flat as markets are sidelined with the absence of fresh economic data and await the release of the US inflation report on Thursday. Support holds at .8400 (1.1905) while resistance remains at .8500 (1.1765)

GBP edges slightly firmer as the US$ faces some selling pressure as US yields fall. The lack of fresh economic data, expect investors to remain sideline and we anticipate the pound to hold below 1.3600 heading into the key US Inflation report on Thursday. UK PM in a speech to parliament announced today it would scrap self-isolation and other remaining restrictions this month. Support holds at 1.3485, while Resistance remains at 1.3560.