Wednesday November 23rd, 2022

The US$ eases, oil prices fall, equity markets firm, while US yields are mixed ahead of the FOMC minutes. The Fed minutes are expected to show a degree of support for higher peak for interest rates than previously signaled in the Feds fight against inflation. Economist at Rand Merchant Bank said, “The risk to markets from the minutes is that they appear less hawkish than expected, which could drive an unwind of some of the rate-hike risk repricing we saw at the of last week”. Investors shrugged off increasing concerns as China widens covid curbs and reports of unrest at the Apply factory underscores growing domestic frustrations. Today, alongside of the FOMC minutes markets will also focus on US Durable Goods Orders, Initial Jobless Claims, Nondefense Capital Goods Orders, PMI data, Michigan Consumer Sentiment Index, and speeches from BoE’s Pill & BoC’s Governor Macklem. In other news. G7 looking at price cap on Russian seaborne oil in range of $65-70 per barrel–EU official. Scotland cannot hold an independence referendum without UK government approval, top court rules. Manchester United FC owners consider selling the Premier League team. FTX was run as ‘personal fiefdom’, hacks, missing assets, attorneys say. Bolsonaro challenges Brazil election he lost to Lula. Huge Foxconn iPhone plant in China rocked by fresh worker unrest, as hundreds of workers join protests. In Currency markets. NZD rallies after record 75bps interest rate hike. CNY eases as worsening covid outbreaks weigh on sentiment. The US$ Index steadies ahead of the FOMC minutes. CNY weakens 0.25%, while Asian currencies are down 0.2% on average vs US$. Trading currencies are mixed with AUD, CHF & JPY dip 0.1%, while MXN is flat, ZAR is up 0.1%, NZD firms 0.4%, and NOK & SEK strengthen 0.5% vs US$.

Oil prices have been volatile in early trading, initially rallying on falling crude stock levels and then tumbling over 2% on news that the G7 is looking at oil price cap of $65-70pb. C$ weakens in early trading driven by falling oil prices. Markets will be somewhat on hold ahead of the FOMC minutes and BoC Governor Macklem’s comments today, but further weakness in oil prices will keep pressure on the C$ vs US$. Support holds at 1.3350 while resistance remains at 1.3475.

EURCAD strengthens as falling oil prices puts pressure on the C$ in early trading. Euro holds near 8-month highs, a breakthrough 1.39 could see Eur extend its rally towards 1.4190 (March 2022. Support rises to 1.3750 while resistance resets to 1.3900.

Euro holds above 1.0300 after better-than-expected PMI results. The gauge measuring Euro-area PMI manufacturing & services unexpectedly rose in November, signaling that businesses see tentative signs that the region’s economic downturn may be easing as inflation cools and expectations of future production improves. A flurry of US data & FOMC minutes will provide direction ahead of Thursday’s US holiday. Support rises 1.0270 while resistance resets to 1.0360.

GBPEUR gains in early trading after a Reuters poll expects a BoE rate hike of 50bps and a top UK court denies Scotland’s referendum without the UK Governments approval. Support remains at 1.1450 (.8733) while resistance holds at 1.1600 (.8620).

GBP finds support from upbeat UK PMI and the Scottish referendum ruling. The data from the UK S&P Global Composite PMI beat market expectations, improving growth optimism. Scotland cannot hold an independence referendum without UK government approval, top court rules. In a Reuters poll expects the Bank of England to raise rates by 50bps in December and expect rates to peak at 4.25% in Q1/23. Focus shifts to the FOMC minutes and a flurry of US data releases which will help provide intraday direction. Support resets to 1.1820, while resistance rises to 1.1960.