Wednesday March 8th, 2023

The US$ remains firm, oil prices are steady, equity markets are down, while US yields rise ahead of day two of Fed Chair testimony. US$ hits a 3-month higher, while equity & commodity markets remain under pressure heading into the 2nd day of Fed Chair Powell’s testimony after he opened the door to a larger half-point rate increase this month and said the Fed are likely to raise rates higher than they previously expected to combat inflation in a stronger economy. Key today Fed Chair Powell testimony, BoC Interest Rate Decision, US ADP Employment Change, also on the docket, US Goods & Services Trade Balance & US Jolts job openings which will help drive intraday market direction.

In other news. Russia claims control over eastern Bakhmut, Ukraine remains defiant. UK Chancellor of the Exchequer Hunt looks set to keep a tight budget next week as he keeps an eye on 2024 election. The US Senate bill paves the way for US Tik Tok ban. US Defense secretary affirms support for Iraq on Baghdad visit. China’s President Xi overhauls China’s bureaucracy ahead of the legislature’s annual gathering. “Harsh times reveal true friends” EU Commission President addresses the Parliament on Tuesday.

In Currency markets. The US$ hit 3-month highs as the Fed Chair signaled higher US rates. CNY hits 2-month lows, GBP drops towards 1.18 on BoE warning, ZAR dropped to 2-year lows & AUD bounces off 4-month lows following Fed comments. CNY dips 0.1%, Asian currencies are down 0.2% on average vs US$. Trading currencies are mixed with ZAR weakens 0.4%, JPY down 0.2%, CHF slips 0.1%, while SEK is flat, NZD is up 0.2%, AUD, NOK & MXN strengthen 0.4% vs US$.

Oil prices steady after falling for the last 2 trading sessions as ongoing supply concerns helped provide some support. C$ is steady after posting its biggest loss since September on hawkish Fed comments. The C$ is down 0.8% so far in March as diverging interest rates between the US & CAD are expected to keep pressure on the loonie. The BoC is anticipated to keep interest rate on hold today and focus will be on Governor Macklem comments for further direction on CAD rates. In the current scenario of a hawkish Fed vs a Dovish BoC could see further C$ weakness. Support resets to 1.3644 while resistance rises to 1.3808 (Nov 3rd).

EURCAD holds stead near 2023 highs as a dovish BoC keeps pressure on the loonie. Support resets to 1.4400 while resistance rises to 1.4550.

Euro continues under pressure, retesting 2-month lows on hawkish Fed comments. Euro consolidates near 1.0500 after the Fed Chair suggested a ½% hike in March and increased the prospect of bigger rate rises during 2023. Domestically weaker German Retail sales and EU growth data which slipped below expectations in Q4 y/y added further pressure to the Euro. Focus remains on the second day of Fed Chair Powell’s testimony & US Jobs data to provide intraday direction. Support resets to 1.0480 while resistance lowers to 1.0600.

GBPEUR bounces off 5-week lows as EU data put pressure on the single currency. Support lowers to 1.1200 (.8928) while resistance remains at 1.1400 (.8772).

GBP hits two-month lows following the first day of the Fed Chair’s testimony. The pound dropped to 2-month lows on the prospect of increasing divergence between the BoE & Fed interest rates. UK Finance minister is expected to take a cautious tone heading into next week’s budget as the conservatives focus on the 2024 elections. Intraday the Fed Chair comments, and US jobs data will continue to drive currency markets today. Support lowers to 1.1800 while resistance resets to 1.1970.