Tuesday June 8th, 2021

The US$ strengthens, oil prices ease, equity markets are up while US yields dip as markets await US inflation data this week. The US$ edges higher while equity markets are holding near record highs as investors wait for US CPI & jobs data out on Thursday. The US$ continues to find support from Treasury Secretary Yellen’s upbeat comments on the weekend. In other news, US Republicans vow to oppose Treasury Secretary Yellen’s G7 deal to impose a 15% global minimum corporate tax rate and will cast a doubt on its future. In Washington, the US President & GOP talks on the Infrastructure talks has stalled. In Europe, the Eurozone economy contracted by much less than expected in Q1/21, while in Germany supply bottlenecks choke German industrial output in April. In Thailand Rising covid cases sees Thai industries sentiment hit 11-month lows in May. Sino/US relationships remains under pressure as the US administration sets up a “strike force” combat China’s unfair trade practices. This morning multiple websites globally including the UK Government, the FT, NYT, Amazon & others all seemed to have outages related to the Fastly services, the cause remains unclear. In the currency markets CNY dips 0.05%, while Asian currencies drop 0.15% on average vs US$. Trading currencies remain under pressure with NOK flat, MXN dips 0.1%, AUD & JPY down 0.25%, NZD falls 0.35% while ZAR tumbles 0.7% vs US$. Expect markets to remain contained ahead of US CPI & Jobs on Thursday, intraday US Jolt Rates, as well as the Goods & Services Trade Balance may provide some direction.

Oil prices edge lower, but Brent Crude manages to holds above US$ 71pb as demand outlook remains positive into H2/21 as travel increases across Europe and the US. C$ holds in a narrow range as markets await the BoC rate decision on Wednesday. The BoC is expected to keep its benchmark interest rates on hold at 0.25% while investors will look for signals from the bank on tapering and future rate hikes. Ontario announced it will loosen its covid restrictions 3-days earlier than planned as infection rates ease. Intraday Cad international Merchandise Trade (Apr) may add to market direction. Support holds at 1.2050 with key pivot at 1.1916 (May2015) with resistance at 1.2150 with key resistance at 1.2235.

Euro holds below 1.22 amid mixed Eurozone data and a strengthening US$. German ZEW economic sentiment fell below expectations, while EZ GDP beat expectations. Markets are somewhat on hold until Thursdays US Jobs/CPI data and the ECB rate decision. Strong domestic vaccination rollout and reopening to summer travelers should provide support to the Euro and supports a buy on dips scenario. Intraday US Jolts will help provide intraday direction. Support resets 1.2000, while resistance holds at 1.2200.

EURGBP strengthens as the prospect of a delayed reopening for the UK weighs on the pound. Support holds at .8550 (1.1695) with resistance remaining at .8665 (1.1540).

GBP remains under pressure amid a stronger US$, UK reopening concerns and NI protocol (Brexit). The strengthening US$ on tapering hopes remains a primary driver for a weakening US$, while concerns that the UK June 21st reopening may be delayed is adding further pressure to the pound. Despite leaving Europe the UK continues to refuse custom boarders between the UK & Norther Ireland. The UK & EU appears to be in a standoff, and we may see the US step in to help mediate a solution. Typically, the UK Government gives a week’s notice expect government continue to monitor the variant situation until June 14th before making the decision to reopen or not. Short term, expect the pound to remain under selling pressure. Support holds 1.4080, with resistance at 1.4180, key resistance holds at 1.4235 (Feb2021).