Thursday November 11th, 2021

The US$ is firm, oil prices dip, equity markets are mixed and while US Treasury yields remain firm. The US$ holds near 16-month highs supported by strong US Treasury yields and risk-aversion sentiment after the US CPI reported its strongest level in more than 30-years on Wednesdays. Intraday expect to see markets to consolidate in thinner trading with Remembrance/Veterans Day holidays. In other news. COP26 in a surprise announcement China and the US have agreed to boost climate co-operation over the next decade. Chinese property developer Evergrande once again averted a default at the last minute as bondholders receive overdue coupon payments. Global luxury sales set to outpace pre-covid levels in 2021. Covid. Germany reports another covid record of 50,196 new cases. Ten states sue the Biden administration over covid vaccine mandate for US health workers. Denmark to impose covid isolation for travelers from Singapore. In currency markets. GBP hits a fresh 2021 low, AUD tests 1-month lows and Turkish Lira tumbles to near 10 to the US$. CNY down 0.15%, while Asian currencies weaken 0.2% on average vs US$. Trading currencies are mixed with ZAR rallying 0.7%, MXN firms 0.2% while JPY is down 0.05% and AUD & NZD are down 0.5% vs US$.

Oil prices remain volatility after Wednesdays strong US inflation data which saw oil prices drop 3% and oil prices remain under pressure today down ½% in early trading with Brent and WTI testing US$82 and 80 respectively. Speculation remains that the Biden Administration could order oil reserves released to help reduce energy costs in the US. C$ weakens in overnight trading as oil prices remain under pressure, US Treasury yields continue to strengthen, and risk-off sentiment returns after China and the US post record high inflation levels on Wednesday. Expect markets to consolidate in thin trading with the Remembrance & Veterans Day holidays. Support rises 1.2405, while resistance resets 1.2599, if breached look for 1.2647 next.

Euro remains under pressure from dollar strength and rising covid concerns. Euro has fallen 6.14% ytd vs US$ and looks vulnerable to further weakness as investors prefer the US$ due to the Fed & ECB divergence of their interest rate policies. Rising covid cases across Europe with Germany testing record high cases, France warning of a 5th covid wave, and Italy offering boosters to over 40’s. Euro sets a new 2021 low at 1.1452 and is vulnerable to weaken further towards 1.1369 (Jul2020) next. Support drops 1.1415 while resistance falls to 1.1549.

EURGBP is flat as Brexit woes balances out interest rate policy divergence between BOE and the ECB. Support holds at .8535 (1.1716) while resistance remains at .8625 (1.1594)

GBP sets a fresh 2021 low at 1.3362 on a strong US$ and Brexit woes. Wednesday’s strong inflation report boosted US yields and the US$ which put additional pressure on an already vulnerable pound. Today saw a sluggish UK economy report which lags its G7 peers in the July/Sept period with its GDP growing at just 1.3%, its weakest 3-month growth since the UK was in lockdown in early 2021. Adding further pressure on the pound are the latest Brexit headlines from EU VP Sefcovic saying that their engagements with the UK had not been going well. Support resets to 1.3300, if breached look for 1.3187 (Dec2020) next, while resistance lowers to 1.3460.