Monday April 19th, 2021

The US$ weakens, oil prices tic lower, equity markets are mixed, US yields ease, and currency markets strengthen on upbeat market mood. The combination of strengthening US & Chinese economies, the Feds commitment to holding rates steady and falling US yields have boosted currency risk-on sentiment. The US President is holding a bipartisan meeting on infrastructure etc to help complete the Presidents stimulus bill. Covid passed several milestones as 50% of US adults have now received at least one inoculation shot, global deaths from the virus passed 3 million and daily cases in the US average 68k, while India is averaging 219K new cases daily. The INR remains under pressure due to the rising cases, down 0.4% today and down 2.3% vs US$ in April. In other currencies TWD rallies 0.7% after the US stops short of naming Taiwan as a currency manipulator, CNY strengthens 0.2%, while Asian currencies are up on average 0.15%. Trading currencies rally with MXN stronger 0.4%, AUD, JPY, ZAR & NZD are up 0.65%, and NOK is up 0.8% vs US$. No key data releases today so markets will focus on President Biden infrastructure talks and US 3- & 6-month bill auctions.

Oil prices come under selling pressure as rising virus infections in India and other counties increase demand concerns. C$ passed its 3rd straight weekly gain on Friday and is starting week-4 on a strong note as risk on sentiment offset weaker oil prices and lower C$ yields. Markets will be focusing on Canada’s first budget in two years, with the government promising C$100bln in “Jump Start” stimulus, ongoing pandemic support, as well as possible new digital & luxury taxes. Intraday the Canadian budget release and oil prices will be the primary focus for markets. Support holds 1.2460 with resistance at 1.2515. 

Euro tests a fresh 6-week high as risk-on sentiment improves. The combination of strengthening US & Chinese economies, improving EU vaccination rates, and falling US yields has helped the Euro strengthen. The EU vaccination campaign has picked up with nearly 20% of adults receiving their first inoculation shot. Political uncertainty continues in Germany as the political impasse for the leadership of the CDU/CSU bloc as they clash on who will replace Chancellor Merkel. Support rises to 1.1980 and resistance resetting at 1.2065.

EURGBP holds steady below the key near 6-week highs. Worries over vaccine hesitancy across the EU vs the UK’s aggressive vaccination campaign is likely to support GBP at current levels.  Support rebounds to .8585 (1.11650) with resistance at .8700 (1.1495).

GBP retests 1.39 on a weakening US$ and ahead of a data heavy week for the UK. The UK’s ongoing successful vaccination campaign and reopening of its economy continues to provide an underlying support to the pound. Focus will be on UK PPI, Unemployment data and CPI out on Tuesday and Wednesday which will be bigger market drivers for the pound. Intraday expect the GBP to track the US$ for direction. Support holds at 1.3740, while resistance resets at 1.3840.