Weekly Outlook for the Two Major Currencies

Oil prices hovered near two-month lows on Monday as supply fears receded while concerns over China's fuel demand and rising interest rates weighed on prices.

Brent crude futures for January had slipped 28 cents, or 0.3%, to $87.34 a barrel by 0103 GMT after settling at their lowest since Sept. 27.

U.S. West Texas Intermediate (WTI) crude futures for December were at $80 a barrel, down 8 cents, ahead of the contract's expiry later on Monday. The more active January contract CLc2 fell 21 cents to $79.90 a barrel.

Both benchmarks closed Friday at their lowest since Sept. 27, extending losses for a second week, with Brent down 9% and WTI 10% lower.

The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into a contango, reflecting dwindling supply concerns.

Tight crude supplies in Europe have eased as refiners have piled up stocks ahead of the Dec. 5 European Union embargo on Russian crude, putting pressure on physical crude markets across Europe, Africa and the United States.

The EU's energy policy chief told Reuters the EU expected to have its regulations completed in time for the introduction of a G7 plan to cap the price of Russian crude on Dec. 5.

RBC Capital analyst Mike Tran said the weak December WTI contract expiration indicated paper market selling rather than true physical market softness.

"Tight global inventories do not support the traditional surplus of barrels rationale for contango," he said in a note.

While North Sea and West African spot market indicators are far from strong, they are also not suggesting signs of distress, he added.

Diesel markets remained tight, with Europe and the United States competing for barrels. While China nearly doubled its diesel exports in October from a year earlier to 1.06 million tonnes, the volume was well below September's 1.73 million tonnes.

Demand in the world's top crude importer remains bogged down by COVID-19 restrictions while expectations of further interest rate rises elsewhere have elevated the greenback, making dollar-denominated commodities more expensive for investors.

The oil market finished last week under pressure. ICE Brent had its worst week since early August, falling by more than 8.7%, while NYMEX WTI managed to settle just above US$80/bbl. Sentiment in the market clearly remains negative as demand concerns weigh on prices. These concerns are driven by the Covid situation in China, along with a gloomier global macro-outlook. The forward curve is also weakening. The prompt WTI time spread is now trading in contango, suggesting a better-supplied spot market. Meanwhile, the ICE Brent prompt spread has also weakened from a backwardation of more than US$1.30/bbl last Monday to a backwardation of just US$0.47/bbl on Friday.

It's no surprise that speculators cut back on their positioning over the last reporting week. The ICE Brent managed-money net-long fell by 29,537 lots over the week to 208,550 lots as of last Tuesday. This move was largely driven by longs liquidating, rather than fresh shorts. Similarly, speculators reduced their net long in NYMEX WTI by 21,978 lots to 191,833 lots. Given the weakness seen in the market since last Tuesday, the actual net long is likely to be quite a bit smaller currently.

As for the calendar this week, it will be shorter than usual, with Thanksgiving in the US on Thursday. Although we could get more clarity on the G-7 price cap for Russian oil on Wednesday, including the level at which the group intends to set the cap. Finally, EU energy ministers will meet on Thursday to try to move closer towards an agreement on their latest energy measures for the region, including joint purchases and price volatility management.

China’s imports of unwrought aluminium and products fell 34% YoY to 196.5kt in October, under pressure from stronger overseas prices of the metal - the latest trade data from Chinese Customs shows. Total imports fell 27% YoY to 1.88mt in the first ten months of the year. On the exports side, alumina exports jumped 943% YoY to 60kt last month, while YTD exports gained 702% YoY to 860kt during Jan’22-Oct’22. These gains are mostly reflective of increased flows to Russia.

India has removed export duties on a number of steel products and iron ore, which were imposed back in May. This includes iron ore lumps and fines with less than 58% iron content and iron ore pellets. Meanwhile, iron ore lumps and fines with an iron content of more than 58% will still attract a 30% duty.

The latest trade data from China’s Customs shows that corn imports fell 58% YoY to 550kt in October, while YTD imports were down 27.5% YoY to 19mt. Among other grains, China’s wheat imports jumped 157% YoY to 1.24mt over the month, however, cumulative imports are still down 2.6% YoY to 7.9mt over the first ten months of the year.

The latest data from Ukraine’s Agriculture Ministry shows that farmers have completed 81% of the grain harvest, amounting to 39mt. The total volume includes 12.3mt of corn, harvested from 50% of the expected area with a yield of 5.81t/ha. The wheat and barley harvests are now complete with farmers producing 19.4mt and 5.6mt respectively. In 2021, Ukraine produced 32.2mt of wheat and 9.4mt of barley.

Friday did not mark a convincing spell for US equities, and although bourses opened up, they quickly lost ground, before staging a turnaround which left the S&P500 up by less than 0.5%, and the NASDAQ virtually unchanged. Equity futures are similarly lacking in a convincing directional steer today. US Treasury yields were more emphatic, with sizeable increases in yields across the curve, which may in time become the driver for a new down-leg in risk assets. 2Y Treasury yields gained 8.1bp while the 10Y rose 6.3bp to 3.829%. It's not clear what if anything is driving this latest pick-up in yields. The main quoted Fed speaker over the latest period was Raphael Bostic, whose thoughts of a slower pace of tightening ahead and peak Fed funds rate of 4.75%-5% is hardly game-changing. G-10 currencies are a mixed bag. The EUR lost a little ground to the USD in the face of these higher bond yields and Fed rate hike expectations. EURUSD is now 1.0327, down from about 1.0360 this time Friday. The AUD is only slightly weaker, at 0.6679, while Cable has picked up slightly to 1.1886 though the JPY has weakened back above 140 and is now 140.31. Asian FX rates haven't done a lot. The CNY is a bit stronger against the USD following Friday's moves which have brought it back down to 7.1198, and that has probably helped pull along the THB for the ride, which is now 35.814.

It was a quiet end to the week for G-7 Macro, and the existing home sales figures for the US showed further declines, but were roughly in line with expectations, so didn't change the story much. Today is equally devoid of macro interest, with a quick glance only merited for the Chicago Fed national activity index, which is likely to signal a slightly sub-trend growth reading.

We expect banks in China to keep the 1Y and 5Y Loan Prime Rates (LPR) unchanged at 3.65% and 4.30%, respectively, given that the PBoC stayed put on the 1Y Medium-term Lending Facility (MLF) rate at 2.75% a week ago.

Covid cases have climbed again. This increases the risk of more localised lockdowns even though Covid measures have been eased. This is because quarantine still depends on the number of positive Covid cases. With more relaxed Covid measures it is not surprising to see the number of cases increase. However, this should not trigger a reversal of the policy direction towards further easing of Covid policies in 2023.

Preliminary (first 20-day) export data has shown exports falling to their weakest since the April 2020 pandemic-induced slump. 20day November exports were 16.7% lower than a year ago, reflecting the weakness of demand in China, Europe, and to some extent the US, as well as the downturn in global semiconductor demand. Imports also fell by 5.5%YoY, which sends a downbeat message about the state of domestic demand, which could yet influence the BoK's rate-setting intentions.

The General Election has not resulted in a clear majority for any party, and today, we will see if talks between former Prime Minister Muhyiddin Yassin's Perikatan Nasional (PN) Party, which came in second place, and a number of other smaller parties, will be enough to form a coalition government, or whether Anwar Ibrahim's Pakatan Harapan (PH) coalition, which gained the most seats, can draw in enough support to form a government. Newswires expect a decision later today. The MYR is currently being sold on concerns about a lack of stable government.

It's the weekend Next week we have major news in New Zealand It's the interest rate decision with the expectation for the New Zealand central bank to raise the interest rate by 0.75% point.

On the other hand, we don't have any major coming news on the CHF.

Previous 3.5%

Expectation 4.25%

Date 23 NOV 2022

As we see in the 4-hour chart diagram We have an uptrend formation we can know that by seeing the ABC structure pull back coming from the uptrend And the market start to do higher lows and higher highs With 20 moving average pointing up We expect on Monday market open with a gap down at 0.58347 And will continue the uptrend until the next supply zone at0.59634

Asian share markets turned hesitant on Monday as investors fretted about the economic fallout from fresh COVID-19 restrictions in China, while bonds and the dollar braced for more updates on U.S. monetary policy.

Beijing's most populous district urged residents to stay at home on Monday as the city's COVID case numbers rose, while at least one district in Guangzhou was locked down for five days.

The rash of outbreaks across the country has been a setback to hopes for an early easing in strict pandemic restrictions, one reason cited for a 10% slide in oil prices last week.

It also dragged MSCI's broadest index of Asia-Pacific shares outside Japan off a two-month high, though it still ended firmer on the week. Early Monday, the index was down 0.1%. Japan's Nikkei added 0.3%, while South Korea eased 0.4%.

S&P 500 futures were down 0.2%, while Nasdaq futures slipped 0.1% in quiet trade.

The Thanksgiving holiday on Thursday combined with the distraction of the soccer World Cup could make for thin trading, while Black Friday sales will offer an insight into how consumers are faring and the outlook for retail stocks.

Minutes of the U.S. Federal Reserve's last meeting are due on Wednesday and could sound hawkish, judging by how officials have pushed back against market easing in recent days.

Atlanta Federal Reserve President Raphael Bostic on Saturday said he was ready to step down to a half-point hike in December but also underlined that rates would likely stay high for longer than markets expected.

Futures imply a 76% chance of a rise of 50 basis points to 4.25-4.5% and a peak for rates around 5.0-5.25%. They also have rate cuts priced in for late next year.

"We are comfortable that the deceleration under way in U.S. inflation and European growth produces a moderation in the pace of tightening starting next month," said Bruce Kasman, head of research at JPMorgan.

"But for central banks to pause they also need clear evidence that labour markets are easing," he added. "The latest reports in the U.S., euro area, and U.K. point to only a limited moderation in labour demand, while news on wages points to sustained pressures."

There are at least four Fed officials scheduled to speak this week, a teaser ahead of a speech by Chair Jerome Powell on Nov. 30 that will define the outlook for rates at the December policy meeting.

Bond markets clearly think the Fed will tighten too far and tip the economy into recession as the yield curve is the most inverse it has been in 40 years.

On Monday, 10-year note yields of 3.84% were trading 71 basis points below the two-year.

The Fed chorus has helped the dollar stabilise after its recent sharp sell-off, though speculative positioning in futures has turned net short on the currency for the first time since mid-2021.

Early Monday, the dollar was a touch softer at 140.26 yen, after last week's bounce from a low of 137.67. The euro held at $1.0327, and short of the recent four-month top of $1.1481.

The U.S. dollar index stood at 106.900, off last week's trough of 105.300.

"Given how far U.S. bond yields and the dollar have dropped in the past couple of weeks, we think there is a good chance that they rebound if the Fed minutes are in line with the recent hawkish language from members," said Jonas Goltermann, a senior markets economist at Capital Economics.

Meanwhile, turmoil in cryptocurrencies continued unabated with the FTX exchange, which has filed for U.S. bankruptcy court protection, saying it owes its 50 biggest creditors nearly $3.1 billion.

In commodity markets, gold was a fraction firmer at $1,751 an ounce, after dipping 1.2% last week.

Oil futures were trying to find a floor after last week's drubbing saw Brent lose 9% and WTI roughly 10%.

Brent edged up 18 cents to $87.80, while U.S. crude added 10 cents to $80.18 per barrel.

The Bank of Korea (BoK) will meet next Thursday and we expect it to carry out a 25bp hike. Consumer prices edged up in October but inflation appears to have passed its peak. The recent FX market move probably would be one factor for BoK to adjust its pace of tightening after its recent jumbo increase. However, given that financial market stresses remain high, the BoK will need to consider market stability for its policy decision.

Next week, Japan will release November CPI inflation for Tokyo. We expect Tokyo inflation to accelerate to 3.6% year-on-year, from 3.5% in October. The travel voucher programme probably cooled down some of the service price pressures although other commodity prices rose to offset this decline.

In Singapore, inflation is expected to remain elevated for both headline and core, although the headline number may dip from last month. Evident price pressure should keep the Monetary Authority of Singapore hawkish to close out the year as it monitors the impact of recent tightening.

Taiwan will release data on export orders and industrial production. We project both figures to post a YoY contraction due to softer demand for semiconductors. Demand for electronics has been dampened by a mix of high inflation data in some economies and slower growth for others. More upside however could be anticipated in next month’s data as China’s Covid-19 measures have been eased.

China will release its Loan Prime Rate next Monday and we expect no change from the current 3.65% for 1Y and 4.3% for 5Y. Loan prime rates will likely be untouched as the Medium Lending Facility Rate was put on hold by the People's Bank of China.

Lastly, Singapore will report revised third-quarter GDP figures and we expect a downward revision to the earlier report. Both retail sales and non-oil domestic exports have shown signs of moderation as higher inflation and slowing global trade appear to be taking their toll on the growth momentum.