Wednesday January 25th, 2023

The US$ inches higher, oil prices are flat, while equity markets and US yields ease as caution returns to markets. Global equity markets pause near 5-month highs, as caution returns that central banks might need to keep hiking interest rates for longer dampened the recent wave of optimism that aggressive monetary tightening among the major central banks is almost done. Canada’s BoC is expected to raise rates again today, with recent strong data supporting expectations for another 25bps hike. A light US economic docket with market likely sidelined until Thursday. Today CAD BoC rate decision, US Tesla, Boeing, IBM & AT&T are among companies to post earnings. Thursday’s Key US Durable Goods, GDP, Nondefense Capital Goods Orders & Initial Jobs claims.

In other news. Microsoft signals darker tech outlook after the company offered lackluster guidance on its earnings call. Germany will allow allies to export Leopard tanks to Ukraine, the US is expected to announce it will send 30 Abrams tanks today. Microsoft cloud outage hits users around the world. German business morale improved in January as Europe’s largest economy stated 2023 with easing inflation and an improved outlook the survey today.

In Currency markets. The US$ edges higher ahead of US GDP tomorrow and next weeks Fed rate decision. C$ steadies as traders await the BoC interest rate decision today. THB eases slightly after its central bank hikes interest rate as expected. AUD jumps after surprising spike in inflation rates. CNY eases 0.15%, Asian currencies are flat on average vs US$. Trading currencies are mixed with NZD down 0.5%, SEK & NOK weaken 0.3%, MXN slips 0.1%, while CHF & ZAR are flat, JPY is up 0.25%, AUD strengthens 0.55% vs US$.

Oil prices remain under pressure as US crude inventories rise and global recession worries offset optimism for a demand recovery in China. C$ is little changed from Tuesday’s close despite weaker oil prices and a firmer US$, as investors remain focused on the BoC rate decision. The BoC is expected to hike interest rates by 25bps, taking Canadian interest rates to 4.5%, with the focus will be on BoC Governors rate statement for the banks next steps. Support holds at 1.3305 while resistance remains at 1.3425.

EURCAD slips as investors focus on the anticipated BoC rate hike and BoC statement. Support holds at 1.4500 while resistance remains at 1.4685.

Euro remains capped at 1.0950 despite update German IFO data. The German IFO data showed that business sentiment improved modestly in January, but despite the positive news the Euro continues to be capped. Analysts remains optimistic for further Euro gains with the improving macro backdrop and continued policy tightening from the ECB. Intraday expect Euro to remain within current ranges ahead of Thursdays key US data. Support holds at 1.0800 while resistance remains at 1.0950.

GBPEUR is flat as markets are sidelined ahead of Thursday key US data. Support holds at 1.1300 (.8850) while resistance remains at 1.1450 (.8733).

GBP continues under pressure amid cautious market mood and disappointing UK data. The US$ edges higher as caution returns that optimism for a China reopening wanes. Today’s data showed British manufacturers unexpectedly lowered their prices in December, which suggests inflation may be easing ahead next week’s BoE interest policy meeting. Recession fears remain at the forefront of investors’ minds after private-sector activity was seen falling at its fastest rate in two years in January. Intraday markets are likely to remain sidelined ahead of key US data Thursday. Support holds at 1.2280 while resistance resets to 1.2400.