Forex News

WTI crude futures were trading around $76 per barrel on Monday, having hit an 11-month low of $73.50 earlier this session, as sentiment remained clouded by concerns about weak demand, particularly from top consumer China. Protests against strict COVID-19 restrictions in some major Chinese cities, including Beijing and Shanghai, intensified during the weekend, exacerbating concerns about weaker growth and subdued demand for oil. At the same time, advanced economies, especially the US and Europe, are witnessing a drop in economic activity due to tightening financial conditions. Meanwhile, investors continued to track developments surrounding a G7 plan to impose a price cap on Russian oil. However, reports of a high price cap eased worries that Russia would retaliate by cutting supply. Market participants also remain cautious ahead of an OPEC+ meeting on December 4th.

The Federal Reserve Bank of Dallas’ general business activity index for manufacturing in Texas increased to -14.4 in November of 2022 from -19.4 in the prior month. The prices paid for raw materials index fell sharply to 22.6 from 32 in October, supporting lower inflation for prices received for finished goods (13.9 vs 22.2). On the other hand, the production index, a key measure of state manufacturing conditions, fell to 0.8 points from 6 in the prior month, suggesting further deceleration in output growth. Also, the new orders index sank to -20.9 from -8.8, recording the sixth negative month in a row and consequently driving finished goods inventories to rebound to 2.2 from -12.6. Still, optimism for the future prevailed, as the future production index increased to 8.9 from 3.1, while expected new orders rebounded to 4.5 from -4.5.

GB100 increased to a 10-week high of 7499

Urea prices fell to under $550 per tonne in the end of November, the lowest in 14 months, pressured by lower feedstock prices and the restart of production in main European producing hubs. The increased availability of natural gas in Europe since the start of the fourth quarter allowed manufacturers to restart production at significantly lowered input costs, allowing farmers to restock concerningly low reserves and erasing shortage worries. In the meantime, major importer India scooped up Russian fertilizers at discounted prices after the Kremlin snubbed export to Europe, freeing up supply from the Middle East to Eurasia. Previously, shortages of energy feedstock in Europe drove fertilizer manufacturers to shut down or operate well below capacity, risking shortages and sending urea prices to a record-high of $1050 per tonne in April. Supply was also jeopardized by the partial suspension of imports from major producers Russia and Belarus in retaliation to sanctions from the West.

The S&P/TSX Composite index was 0.4% lower to trade at the 20,300 mark on Monday, easing from the five-month high hit in the prior session as concerns of political unrest in China pressured Toronto’s heavyweight commodity-linked shares. Oil and natural gas producers led the losses in the session, tracking the further downturn in fossil fuel prices with Gran Tierra, Cenovus, and Vermillion Energy tanking between 3.5%-4.5%. In the meantime, banks were also in the red as investors refrained from making large bets ahead of multiple earnings results scheduled for this week. On the other hand, tech shares sharply outperformed the broader index to add over 2% on average, outperforming their US counterparts.

The Baltic Dry Index, which measures the cost of shipping goods worldwide, extended gains for the fourth session on Monday, rising about 1.7% to an over two-week high of 1,347 points. The capesize index, which tracks iron ore and coal cargos of 150,000 tonnes, extended its winning streak for the fourth day, advancing 3.5% to its highest level since October 28th at 1,669 points; and the panamax index, which tracks about 60,000 to 70,000 tonnes of coal and grains cargoes, gained for the third day, rising 1.2% to 1,496 points. Meanwhile, the supramax index shed two points to 1,180 points.

The Dow lost more than 100 points on Monday, and the S&P 500 and Nasdaq were down roughly 0.5% each as investors grew worried about the prospects of a global recession. Widespread protests against strict COVID-19 restrictions in several Chinese cities exacerbated concerns about the health of the world's second-largest economy while sending shockwaves through global equities markets. On the corporate side, Apple tumbled roughly 2% after a media report said the company would face an approximately 6 million iPhone Pro production shortfall due to unrest at Foxconn's Zhengzhou plant. US-listed Chinese companies, such as e-commerce giants Alibaba Group and JD.com, also came under pressure. Investors now look ahead to a slew of US economic releases this week, including the November non-farm payroll report on Friday, for clues about the economy and the Federal Reserve rate path.

Brazil’s Ibovespa index was slightly lower to trade below the 109,000 level on Monday, mainly dragged down by retailers and commodity-linked stocks. Concerns about a record wave of coronavirus infections in China and violent protests against Covid restrictions that spread to some of its biggest cities over the weekend rippled across international markets. Domestically, the focus remains on discussions about the PEC of Transition. Meanwhile, the latest central bank’s “Focus survey” showed financial markets raised their inflation forecasts to 5.91% in 2022 (vs 5.88% in the previous week) and to 5.02% in 2023 (vs previous 5.01%). Growth projections were revised slightly up to 2.81% in 2022 (vs 2.80% a week ago) but kept unchanged at 0.70% in 2023.

Canada recorded a current account deficit of CAD 11.1 billion in Q3 2022, the biggest gap since Q3 2020, and following surpluses in the first two quarters of 2022. The trade in goods and services balance shifted to a CAD 4 billion gap from a CAD 5.9 billion surplus in the second quarter, the first deficit in a year. Despite record-high volumes, exports of energy products were down by CAD 4.2 billion due to a 16.1% decline in prices, the first decrease in exports of energy products since Q2 2020. At the same time, sales of consumer goods were down by CAD 2.3 billion, following a strong second quarter. Imports of goods rose by CAD 1.7 billion, mainly due to motor vehicles and parts. Also, the trade in services deficit rose by CAD 1.2 billion to reach CAD 5.7 billion and the investment income deficit was up by CAD 3 billion to CAD 4.2 billion, in the context of rising interest rates, with income payments rising by more than receipts.

The Indian rupee stabilized at around 81.6 per USD in the second half of November, significantly stronger than the record low of 83 touched on October 19th as signals of slower rate hikes by Fed officials dampened demand for the dollar. In turn, expectations of slower tightening by the US central bank supported demand for riskier assets and ramped up dollar inflows to purchase Indian equities, supporting the rupee. On the policy front, investors expect the RBI to raise its key rate by 50bps in its next meeting, adding to the 180bps in interest rate hikes since the start of the bank’s tightening cycle in May. Still, relatively slow tightening by the Indian central bank, soaring inflation, and trade imbalances drove the rupee to depreciate 8.7% year-to-date.

Stock futures contracts tied to the three major indices were down roughly 1% on Monday, putting Wall Street on track to start the week on a sour note as investors fret about the prospects of a global recession. Widespread protests against strict COVID-19 restrictions in several Chinese cities exacerbated concerns about the health of the world's second-largest economy while sending shockwaves through global equities markets. On the corporate side, Apple tumbled roughly 2% in premarket trading after a media report said the company would face an approximately 6 million iPhone Pro production shortfall due to unrest at Foxconn's Zhengzhou plant. Investors now look ahead to a slew of US economic releases this week, including the November non-farm payroll report on Friday, for clues about the economy and the Federal Reserve rate path. In last holiday-shortened trading week, the Dow jumped 1.78%, the S&P 500 rose 1.53%, and the Nasdaq Composite gained 0.72%

The Swiss franc strengthened to the 0.94 per USD mark in the end of November, hovering at three-month highs with support from a weaker dollar as the slowing US economy drove Fed policymakers to signal lower rate hikes in upcoming meetings. In turn, hawkish signs from the Swiss National Bank continued to support the domestic currency. SNB Chairman Jordan stated that there is a high probability that the central bank will further tighten policy in the bank’s next decision, as current interest rates are low given the elevated inflation expectations. Pledges of tighter policy came despite the recent slowdown in price growth as annual inflation was at 3% in October, well below central bank expectations of 3.4% and August's 29-year peak of 3.5%. The SNB raised its policy rate by 75bps in its last meeting, lifting borrowing costs to positive territory for the first time since 2011.

The value of loans in Brazil increased by 1% month-over-month to BRL 5,215 million in October of 2022, following a downwardly revised 1.8% rise in the prior month, which was the strongest in a year. On an annual basis, the value of loans advanced by 15.8% in October, after a downwardly revised 16.4% in the previous month. Meanwhile, the default ratio in non-earmarked loans increased to 4.2% in October from 4.1% in September, the highest since August 2018's 4.22%.

Mexico’s trade deficit narrowed to USD 2.012 billion in October of 2022 from USD 2.799 billion in the same month of the previous year, compared with analysts’ expectations of a USD 3.216 billion trade gap. Exports increased 17.7 percent from a year earlier to USD 49.275 billion, of which non-oil sales soared 18.5 percent to USD 46.383 billion, and oil exports rose 6.9 percent to USD 2.892 billion. Non-oil exports to the US increased by 19.1 percent, and those to the rest of the world expanded by 15.3 percent. Meanwhile, imports advanced 14.8 percent to USD 51.287 billion on non-oil purchases (15.0 percent to USD 45.977 billion) and a surge in oil imports (13.5 percent to USD 5.310 billion).

The annual growth rate of total credit extended to the Greek economy eased to 6.2 percent in October of 2022, the least since June 2020, from 7.2 percent in the previous month, tracking higher borrowing costs and growth concerns for Eurozone member states. Credit to the general government rose by 7.6 percent annually, slowing from the 9.1 percent rise in September. Meanwhile, the total private sector financing expanded by 5.3 percent, down from a 6 percent increase.

Retail sales in Ireland rose by 0.7 percent from the previous month in October of 2022, rebounding from the downwardly revised 1.7 percent decline in September, according to provisional results. The sharpest increases were noted in bars (8.9 percent), clothing and footwear stores (7.5 percent), and motor trades (2.9 percent), offsetting the contractions in hardware stores (-5.4 percent), and department stores (-0.8 percent). Still, retail sales sank by 2.6 percent on a yearly basis, easing from the downwardly revised 5.6 percent drop in September and marking the sixth consecutive annual decline in sales volumes.

The Brazilian real was trading around $5.4, hovering at levels not seen since late July, as investors grew worried about the state of Brazil's finances after Lula's incoming administration proposed further public spending. On the monetary policy front, Brazil's central hinted at cutting rates from June 2023 despite uncertainty regarding the inflation path. Policymakers started raising rates in March 2021, pushing borrowing costs to a terminal level of 13.75% in August. As a result, Brazil's annual inflation rate eased to 6.47 percent in October 2022, the lowest reading in 19 months. The Brazilian real lost more than 4% in November, but it remains up roughly 5% since the beginning of 2022.

Rice futures rose above $18 per hundredweight, touching their highest levels since June 2020, supported by a fall in supply as well as expectations of rising demand from China and European countries. The USDA has lowered its 2022 US rice production forecast to 164.3 million hundredweight, about a million less than October’s report following a downward revision in the yield estimate. Global supplies were also reduced by 2.5 million tons to 686.8 million, on lower beginning stocks for India and smaller production for Pakistan, Bangladesh, Nigeria, and Sri Lanka. On top of that, prices of rice shipped from India edged up in November, as limited supplies are available for exporters amid aggressive government buying of paddy to encourage higher domestic output. In neighboring Bangladesh, rice prices have also remained elevated despite the government's latest efforts to stabilize the market, including allowing imports and duty cuts.

Sugar futures on ICE fell to below 19.3 cents per pound, retreating further from the seven-month high of 20.3 cents touched on November 15th as the retreat in crude oil prices increased the opportunity cost of using cane feedstock to distill ethanol, driving producers to increase the crush of sugar. Still, prices remain over 7% higher from the start of the month as authorities in major sugar producer India reduced the export quota for the 2022/23 marketing year. The country will grant export permits for 6 million tons of sugar until May 2023, nearly half of the quota from the prior year. At the same time, investors continued to assess supply expectations for top producer Brazil amid the possibility that president-elect Lula could lift the country’s fuel price cap in January, further supporting prices.

Most commodities sank on Monday, after protests against widespread lockdowns in China to curb rising coronavirus infections sparked demand concerns. Both Brent and Crude Oil futures were down as much as 5% in early Asian trading hours, falling below $80 and $74 per barrel respectively, and hitting the lowest level this year. Traffic in Chongqing, one of China’s biggest cities, was down by half from a year earlier on Monday morning, while in Beijing it was down 45%, and in Guangzhou, it was 35% lower. Meanwhile, copper and Iron Ore listed in Dalian fell as much as 2%. Also, cooking oil futures in Dalian dropped by as much as 3% as many hotels and restaurants remain closed. Finally, the weekly spot price for coal freighted from the top mining region of Shanxi to the trading hub of Qinhuangdao declined by 11% to 1,260 yuan a ton due to rising infections in the country’s three major mining hubs of Shanxi, Shaanxi, and Inner Mongolia.