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Sterling took the top spot this week, likely on reassurances another COVID-19 lockdown wasn’t in the cards. It was closely followed by the Loonie and Greenback who likely benefitted from rapidly rising inflation and rate hike expectations.

Notable News & Economic Updates:

Omicron cases are hitting highs, but new data suggests lower probability of severe cases

ASEAN manufacturing conditions continued to improve sharply during December to 52.7 vs. 52.3

OPEC+ agrees oil output hike from February as omicron Covid cases soar

Polish central bank hikes rate to 2.25% as expected

J.P.Morgan global manufacturing survey showed upturn continued at the end of 2021

OPEC and Russia agree to increase oil output by 400K bpd in Feb amid lagging production

FOMC meeting minutes hint members’ willingness to raise interest rates/reduce balance sheet earlier than expected

Euro area annual inflation up to 5.0% in Dec. vs. 4.9% in Nov.

December U.S. payrolls rise below forecast at only 199K, but unemployment rate fell to 3.9% (below 4.1% forecast)

Oil slips from the $80 handle, but set for weekly gain on Kazakh, Libyan concerns

Peru’s central bank raised its key interest rate to 3%

Intermarket Weekly Recap

Dollar, Gold, S&P 500, Oil, Bond Yield, Bitcoin Overlay 1-Hour
Dollar, Gold, S&P 500, Oil, Bond Yield, Bitcoin Overlay 1-Hour

The focus for the first week of 2022 wasn’t much different than the end of 2021 as traders seemed to jump right back into pricing in expectations high inflation rates and rate hikes.

Bond yields took off higher right from the Monday U.S. trading session, arguably fueled by U.S. traders getting ready for a likely environment of high inflation and rising interest rates ahead (Fed signaled in December we may see three rate hikes in 2022), and arguably some COVID-19 fears relief as fresh data suggested that the Omicron variant may have lower odds of bring on severe cases.

This focus on inflation and monetary policy expectations only accelerated on Wednesday after the the Federal Reserve released the meetings from their December monetary policy meeting.

This was the big catalyst of the week as the minutes not only re-iterated expectations of rate hikes in 2022, but surprisingly, a potential rapid wind down of their balance sheet and a possibility that rate hikes may come sooner.

This sent bond yields and the U.S. dollar even higher, while at the same time, taking down risk assets as traders likely took down trades that generally benefited from the easy monetary conditions of the past two years. Equities took a big tumble (especially tech stocks), but it was crypto assets that took the biggest hit as most of the major coins were hit with double digit losses for the week.

In currencies, the British pound took the top spot among the majors, with no major economic catalysts from the U.K. It was more likely the promise from U.K. Prime Minister Boris Johnson that the U.K. would not undergo another lockdown as COVID-19 cases that helped Sterling outperform this week.

On the other end of the spectrum, the Aussie and Kiwi were the big laggards of the week, likely falling under the risk aversion pressure and strengthening Greenback as there were no major catalysts of note from either Australia or New Zealand.

USD Pairs

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

A record 4.5M Americans quit their jobs in November

Kashkari Sees 2022 Fed Rate Hikes to Counter Inflation Risk

U.S. ISM manufacturing PMI down to 58.7 vs. 60.0 expected in Dec.; prices declined, likely catalyst for lower bond yields and USD on Tuesday

U.S. JOLTS job openings fall to 10.562M vs. 11.075M expected

The average rate on the 30-year fixed mortgage hit 3.33% last week

Private job growth totals 807,000 in Dec. more than doubling expectations, ADP says

IHS Markit US Services PMI Business Activity Index registered 57.6 in Dec. vs 58.0 in Nov.

FOMC meeting minutes hint members’ willingness to raise interest rates earlier than expected

Fed’s Bullard backs March interest rate hike, citing ‘unanticipated’ inflation shock

U.S. weekly jobless claims rise slightly to 207K despite spiraling Omicron cases

U.S. factory orders rose 1.6% in November, October was revised higher to 1.5%

ISM Services PMI came in at 62 in Dec. vs. 69.1 in Nov.

U.S. Nonfarm payrolls rise by 199,000 in December

GBP Pairs

Overlay of GBP Pairs: 1-Hour Forex Chart
Overlay of GBP Pairs: 1-Hour Forex Chart

U.K. govt asks public sector to test contingency plans for a 25% staff absence scenario

U.K.’s BRC showed Dec prices up by 0.8% vs last year, the highest since Mar 2019

U.K. mortgage approvals for Nov. came in nearly inline with Oct at 67K

IHS Markit/CIPS U.K. PMI rose to 57.9 in Dec. vs. Nov’s three-month high of 58.1.

Boris Johnson plans to ‘ride out’ Omicron wave with no more curbs

U.K. House prices in December 2021 were 9.8% y/y – Halifax House Price Index

IHS Markit/CIPS U.K. Construction PMI: 54.3 in Dec. vs. 55.5 in Nov.

EUR Pairs

Overlay of EUR Pairs: 1-Hour Forex Chart
Overlay of EUR Pairs: 1-Hour Forex Chart

IHS Markit/BME Germany Manufacturing PMI came in unchanged at 57.4 in December

Final Eurozone Manufacturing PMI at 58.0 in December (Flash: 58.0, Nov Final: 58.4)

German retail sales unexpectedly rises by 0.6% in Nov vs. 0.5% dip expected

ECB will act if inflation outlook picks up, Kazaks says

Final Eurozone Services Business Activity Index: 53.1 in Dec. vs. 55.9 in Nov.

Foreign demand pushes Germany’s factory orders 4.1% higher in Nov vs. 3.4% rise in Oct

Germany Industrial Production -0.2% in November 2021; October revised to +2.4%

Volume of retail trade up by 1.0% m/m in euro area & by 0.9% m/m in the EU

CHF Pairs

Overlay of CHF Pairs: 1-Hour Forex Chart
Overlay of CHF Pairs: 1-Hour Forex Chart

Swiss Manufacturing PMI rose to 62.7 points from 62.5 points in November

Swiss consumer price index (CPI) fell by 0.1% m/m in December 2021

Swiss Retail Sales in November 2021: +5.4% y/y; 1.4% m/m

Swiss unemployment rate ticked higher in Dec. 2021 to 2.6% vs. 2.5% in Nov.

CAD Pairs

Overlay of CAD Pairs: 1-Hour Forex Chart
Overlay of CAD Pairs: 1-Hour Forex Chart

IHS Markit Canada Manufacturing PMI registered at 56.5 in December, down from 57.2 in November

In Nov., Canada Industrial Product Price Index (IPPI), increased 0.8% m/m; Raw Materials Price Index (RMPI), fell 1.0% m/m

Value of Canada building permits up 6.8% in Nov.

Canada New Housing Price Index: +0.8% in Nov.

Canada’s trade surplus rose to C3.13B in November of 2021

Canada added a net 54,700 jobs vs. forecast of +27,500; Unemployment rate dips to 5.9% from 6.0%

Canada Ivey PMI: 45.0 in Dec. vs. 61.2 in Nov.

NZD Pairs

Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart

Global dairy prices rosy +0.3% vs. a -1.5% decline on Dec. 21

AUD Pairs

Overlay of AUD Pairs: 1-Hour Forex Chart
Overlay of AUD Pairs: 1-Hour Forex Chart

ANZ Australian job ads slip 5.5% as Omicron hurts sentiment

JPY Pairs

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart
Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

Japan’s manufacturing PMI down from 54.5 to 54.3 in December

Japan monetary base logs record high at end of 2021

Japanese household spending fell in November by 1.2% m/m