Friday December 18th, 2020

The US$ consolidates on the last Friday of trading in 2020. US bounces off its lows as hopes of a US stimulus announcement today fades with US lawmakers expected to continue discussions into the weekend. Alongside the US stimulus lawmakers are focused on avoiding a government shutdown, markets remain optimistic that lawmakers will positively conclude negotiations over the weekend. The FDA advisory gives its approval for the Moderna vaccine, setting the stage for the FDA granting emergency approval for the vaccine, while Pfizer is seeking vaccine approval in Japan. Global virus cases are approaching 75mio, the US reported another day of +3k covid deaths and Europe is experiencing a surge of new virus cases. Other stories weighing on the markets are reports of online breaches of US federal agencies by hackers, with concerns about US nuclear facilities impacting markets. Sino/US tensions increases as the US adds a total of 77 companies including China’s SMIC to its economic blacklist. CNY fell slightly, down 0.05%, while Asian currencies are dipped 0.15% on average vs US$. Trading currencies give back gains with AUD down 0.15%, MXN, JPY, NZD and NOK down 0.3%, while ZAR remains the outlier up 0.5% vs US$. With no key US economic releases today, the markets will remain focused US Stimulus updates. 

Oil prices steady near 9-month highs and are on track for their 7th consecutive weekly gain on vaccine rollout support and falling crude stocks. C$ weakened overnight as oil prices ease slightly and US$ bounced off their lows on Sino/US tensions, hacking concerns and failure to reach a US stimulus agreement. Domestically yesterdays announcement that Canadian home prices rose 0.9% in Nov, this was the strongest Nov rally in the index’s 22-year history, with Hamilton, Halifax & Montreal leading the gains. Canadian Retail Sales (key) and New Housing Price Index data will be released today. Support 1.2685 if breached look for a potential move to 1.2522 (Apr 2018) while resistance lowers to 1.2800. 

Euro holds steady around the 1.2250 levels despite uncertainties over US stimulus and Brexit. Euro remains somewhat sidelined to GBP’s 100bps fall as Brexit headlines become increasingly more pessimistic. US stimulus talks are expected to continue into the weekend, but markets remain optimistic of an agreement. Domestically German IFO & PPI data came out better than expected helping to provide Euro support. A strengthening Euro in the midst of a pandemic and a struggling economy will likely remain a key concern for the ECB. Our bias is to continue to look for opportunities to sell into a rally for a weaker Euro in to Q1/21. Support rises to 1.2175 with resistance 1,2265, if breached we could see an extension towards 1.2400.

GBP volatility continues as the Brexit pendulum swings from optimism to pessimism. GBP drops from yesterday highs as US Fishing rights remains the key sticking point, with the EU Chief Negotiator saying, “I cannot honestly say if there will be an agreement”. Investors believe fishing in the big picture is too minuscule to prevent a much more lucrative Brexit deal. Domestically retail sales exceeded expectations, as well GFK consumer confidence also came in better than expected. Expect GBP to remain volatile heading into the Dec-31st deadline as negotiators continue their negotiations. Support at 1.3104 (Nov12th) with resistance at 1.3773 (May2018), if breached the potential to 1.3935 (Apr2018)