Friday April 23rd, 2021

Equity markets dip, Oil and US yields rise, US$ weakens amid covid concerns and speculation of a US capital gains tax. President Biden is expected to unveil his tax plan next week, with speculation that Capital Gains Tax may rise from 20% to 39.6%. President Biden’s tax plan is targeting US$1T in revenue to support his US$2.3T Jobs & Infrastructure plan. US equities sold off having their worst day since the middle of March on the prospect capital gain tax increase news. In other news, India recorded a new record of virus case’s surpassing 330k today and Russia extends its lockdowns measure beyond its May day holidays. The US CDC meets today to review the J&J vaccine and determine if the benefits outweigh the risk. Tensions ease in Europe as Russia orders troops to withdraw from the Ukraine’s border. The US$ index remains under pressure, trading down 2.3% MTD and down 9.3% since Apr2020. CNY remains stable and is Flat vs US$, Asian currencies are up 0.1% on average. Trading currencies remain mixed with JPY & ZAR are up 0.1%, NZD is flat while MXN weakens 0.2% AUD & NOK fall 0.35% vs US$. Today focus shifts to US PMI data and ECB Lagarde speech for intraday direction.

Oil prices inches higher balancing covid demand concerns vs growth optimism across Europe and North America. Surging covid cases across India the worlds 3rd’s largest oil consumer is expected to keep a cap on any attempts for oil to rally in the short term. C$ maintains its gains on firmer oil prices and the underlying economic growth optimism post the BOC’s Wednesdays hawkish comments. Focus will be on US PMI and expect C$ to track oil prices for intraday direction. Support holds at 1.2450 with resistance at 1.2550. 

Euro retest’s 1.2050 on upbeat EZ PMI data and a soft US$. Euro strengthens towards 2-month highs from better-than-expected PMI data from the Eurozone and France, while German had stronger Manufacturing PMI it’s Service and Composite PMI data fell below expectations. The ECB President is set to speak later today and will likely touch on its continued support for its bond purchasing scheme, as well she may comment on the need for the Pandemic Emergency Purchase Program. The EU’s economy is slowly rebounding, but the continued surge in covid cases globally may continue to provide underlying support for the US$ and our bias remains to sell Eur on rallies. Support rises to 1.1980 and resistance resetting at 1.2075.

EURGBP levels hold steady. The prospect that rising vaccination levels will help the EU begin to exit current lockdowns and support economic recovery. Support holds to .8585 (1.11650) with resistance remaining at .8700 (1.1495).

GBP firms, but holds below 1.39 despite strong data results. Today saw across the board better-than-expected Retail sales and PMI data results which is a positive sign for the UK reopening strategy. As global covid cases continue to rise, the prospect of markets returning to safe-haven/risk off remains high and could keep a cap on GBP in Q2. Intraday US PMI data will provide intraday direction. Support lowers to 1.3835, while resistance resets at 1.3940.