The Morning Update

The US$ slides, oil prices hold steady, equity markets gain, while US yields are mixed as rate-pause signals lift risk sentiment. The US$ remains under selling pressure while European equities & US equity futures gained as investors digested Wednesday’s Fed Minutes & the US inflation report suggesting that the end point of the era of aggressive rate hikes is near. ECB Villeroy de Galhau commented that the ECB has already finished most of the interest-rate-increases with expectations the ECB will hike just 25bps in May. InFocus today, US Jobless Claims, US PPI, BOE’s Pill Speech, & BoC’s Governor Macklem Speech will help provide some intraday direction to currency markets.

In other news. Fed expects banking crisis to cause a recession this year, minutes show (CNBC). China’s exports rise unexpectedly, but economists warn of weakness ahead. Strikes weigh on UK economy which stagnated in February. French unions rally supporters on the streets ahead of pension ruling. Canada & South Korea eye intelligence-sharing pact. China’s March crude oil imports surge 22.5% from year earlier.

In Currency markets. The US$ drops to 2-month lows on cooling US inflation report, while major & emerging currencies rebound. CNY eases 0.1%, while Asian currencies gain 0.25% on average vs US$. Trading currencies are mixed with MXN down 0.2%, JPY flat, NZD & SEK gain 0.3%, NOK is up 0.4%, AUD & CHF strengthen 0.65%, and ZAR rallies 0.9% vs US$.

Oil steady as markets balance a weakening US$ & a drop inUS crude stockpiles are offset over a possible US recession and weaker oil demand. Chinese CNY remains contained as investors fret over weak global demand outlook. C$ extends its gains hitting 2-month highs as the US$ weakens, while the BoC keeps rates unchanged and plays down the prospect of interest rate easing in Q3. Today investors will be focused on BoC Macklem speech today for any signs of rate direction. Support resets to 1.3375, with key pivot 1.3333 (75 cents) while resistance lowers to 1.3470.

EURCAD holds steady near 18-month highs with the ECB expected to hike a further 25bps at its May meeting. Support remains at 1.4650 while resistance holds at 1.4800.

Euro holds above 1.1000 amid US$ weakness. Euro remains buoyed by the weaker US$ and gained further support after Eurozone industrial production beat estimates with 1.5% in February. Comments from ECB policymaker suggested the ECB will ease its aggressive hiking strategy but is expected to hike 25 bps at its next in May. Focus today will be on US PPI for further signs of easing in US inflation. Support rises to 1.0950 while resistance rises to 1.1085.

GBPEUR holds steady as both currencies gain equally vs US$,but GBP is vulnerable for future weakness vs Euro. Support holds at 1.1300 (.8849) while resistance remains at 1.1450 (.8733).

GBP strengthens through 1.25 despite disappointing economic outlook. The monthly UK GDP and industrial data fell short expectations. The British economy stagnated in February as strikes by public workers hit output, but an improved January was stronger than first thought suggesting a recession is less likely in Q2/2023. The IMF projects the UK is the bottom of the world’s major economies in terms of expected growth in 2023 with a 0.7% fall on a per capita basis. Focus will be on US PPI & BoE Pill speech for direction today. Support holds at 1.2400 while resistance remains at 1.2550.

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