Wednesday November 30th, 2022

The US$ eases, oil prices firm, equity markets are up, while US yields are mixed as investors await the Fed Chairs speech. Risk-on sentiment improves ahead of Fed Chairs Powell’s speech today where he is expected comment on the economy and the labor markets. Powell is expected to signal that the Fed’s next rate hike will step down to 50bps, though he is widely anticipated to warn that policy tightening has further to run. In China reports of clashes in Guangzhou as protests continue over covid restrictions, while market optimism continues that China will start to ease its covid-zero policy. Today alongside Fed Chairs speech, markets will also monitor the Fed Beige Book, US GDP, US ADP Employment Change, US Pending Home Sales and JOLTS job openings to help provide intraday direction. In other news. China factory, services activities slide to 7-month lows on covid curbs. Oil prices rise for a 3rd day with OPEC+ decision & stockpiles in focus. South Korea scrambles jets as China & Russian conduct joint patrols entering air defense zone. US House to vote to block rail strike despite labor objections. EU leaders to push for defense investment program at Dec 15-16 Summit. Croatia heading to enter Eurozone, adopts first budget in Euros. Alberta Premier Danielle Smith seeks more sovereignty from Canada in new bill. EU edges closer towards deal on Russian oil price cap this week. In Currency markets. The US Index heads for its biggest monthly loss since 2010, down 4.3% in November. CNY rallies 1%, while Asian currencies strengthen 0.5% on average vs US$. Trading currencies are mixed with MXN weakens 0.25%, JPY down 0.15%, while ZAR & SEK gain 0.25%, CHF up 0.4%, AUD & NZD firm 0.55%, and NOK strengthens 0.65% vs US$.

Oil prices firmed on falling US crude inventory, a weaker US$ and improving optimism on the outlook for improving Chinese demand. C$ bounces off November lows vs US$ from improving optimism that China is moving closer to easing its covid-zero policy. Tuesday’s CAD GDP grew at 2.9% in Q3 above market expectations and sets the stage for a 25bps rate hike by BoC next week. Intraday Fed Chair Powell’s speech and US data releases will be the primary driver of markets today. Support rises to 1.3435 while resistance resets to 1.3560.

EURCAD eases slightly as commodity prices improve and markets brace for the Fed Chairs speech. Support resets to 1.3930 while resistance steadies at 1.4025.

Euro stalls below 1.0400 on softer EU inflation data. European equity markets gain the most in more than a week with sentiment buoyed as Eurozone inflation slowed for the first time in 18-months. The fall in inflation offered a glimmer of hope to the ECB in its fight against inflation and helped provide support the Euro. Investor focus will be on US data & the key Fed Chairs comments. Support holds at 1.0300 while resistance steadies at 1.0425.

GBPEUR inches higher as both currencies benefit by expected slowing inflation levels and market risk on sentiment improves. Support holds at 1.1500 (.8695) while resistance remains at 1.1625 (.8602).

GBP steadies around 1.2000 on a weaker US$ ahead of Fed Chair Powell’s speech. Improving risk on sentiment helped the pound bounce off its daily lows to retest 1.2000 level. The BoE Chief Economist Pill said that he is expecting inflation to fall “rapidly” in the 2nd half of 2023. Pill went on to say to expect more interest rate hikes to come but added that his base case does not include the policy rate reaching 5.25%. Intraday all focus will be on US economic releases and Fed Chair Powell’s speech. Support remains at 1.1900, while resistance holds at 1.2080.