Wednesday May 25th, 2022

The US$ firms, oil prices are higher, equity markets rise, while US yields ease ahead of the FOMC minutes. Equity markets firm, while the US$ pushes higher as markets wait for the release of the Federal Reserve minutes of its May policy meeting. Investors are concerned growth may slow dramatically amid tighter monetary conditions, the war in Ukraine and the ongoing China lockdowns adding pressure by choking supply chains. Intraday US Durable Goods Orders, Fed Brainard speech and the FOMC minutes will provide direction today. In other news. Russia’s central bank moved up next meeting by 2-weeks after the government suggested further monetary easing may be needed to help stem the rubles surge vs US$ (RUB up 33% since March). Pfizer warns of ‘constant waves’ of covid as complacency grows. Battle for the Donbas heads for stalemate (FT). EU summit unlikely to find solution on Russian oil embargo, von der Leyen says. The currency markets. The US$ index bounces off 1-month lows, Russian RUB hits 4-year highs vs US$, while CNY slips as weak growth weighs on the currency. CNY down 0.25%, while Asian currencies are down 0.15% on average vs US$. Trading currencies are mixed with NOK falls 0.5%, JPY, CHF & AUD down 0.3%, MXN dips 0.2%, while NZD up 0.05% and ZAR firm 0.4% vs US$.

Oil prices edges higher on tight supply and the expected summer demand uplift, with US Memorial Day weekend travel to be busiest in two years. C$ choppy trading continues after hitting a 3-week high at 1.2762 the loonie reverses and weakens vs the US$ on concerns of a weakening economic outlook. Intraday US Durable goods and the FOMC minutes will provide direction today ahead of CAD Retail Sales on Thursday. Expect markets to remain volatile within a 1.2750-1.2900 range. Support resets to 1.2770, while resistance rises to 1.2870.

Euro slips below 1.0700 ahead of the FOMC & US Durable Goods. The US$ bounces off 1-month lows which put selling pressure on the Euro and capping its 5-days of gains. The ECB Financial Stability Review added pressure after warning that corrections in financial markets could be triggered by escalation of the Ukraine war, weakening global growth or if the monetary policy needs to adjust faster than expected. Markets will switch its focus to the FOMC & US Durable Goods report for intraday direction. Support resets to 1.0620, while resistance lowers 1.0720.

EURGBP weakens on a cautious ECB financial stability review, but our bias favours to buy Euro on dips. Support holds at .8500 (1.1764) while resistance remains at .8600 (1.1628).

GBP erases its recovery gains as the pound suffers political and economic uncertainties. Sue Gray published the ‘party-gate’ report today, the fallout is expected to put further political pressure on the PM. The pound is expected to remain under pressure on any rallies as fears about the fragility of the UK economy continue after the much weaker than expected PMI data. BoE chief economist said in an interview that he thought more tightening was needed but not necessarily to a ‘super reactive’ stance. Support holds at 1.2460, while resistance remains at 1.2580.