Friday February 12th, 2021

The US$ bounces off the weekly lows, shrugging off disappointing jobs data by focusing on positive vaccine news and US stimulus updates. The White House announced yesterday that it secured 200 million more Covid-vaccine doses, bringing the US total to 600 million. The House Dems complete their impeachment case and refocusing on the US$ 1.9T stimulus relief plan. Speaker Pelosi spoke on the US stimulus plan saying, “we hope to have this all done by the end of February”, if approved stimulus checks could be sent as soon as late March. Equity and oil markets are lower, US Treasury yields remain unchanged and Asian markets are quiet with the Lunar New Year holidays. CNY & Asian currencies are flat on average vs US$. Trading currencies turned weaker with ZAR dips 0.1%, JPY & NOK are down 0.25%, AUD down 0.34%, while both NZD & MXN dropped 0.5% vs US$. Intraday focus will shift to the Michigan Consumer Sentiment Index and US Stimulus for direction.  

Oil prices retreat further as demand concerns from the rise of covid-variants. The IEA comments that oil supply was still outstripping global demand painted a more pessimistic picture than the markets had expected. C$ weakens from its 3-week highs as oil prices slip and the US$ regains strength on vaccination news. Vaccination delays across Canada will likely have a greater negative impact on C$, as it may impede Canada’s ability to reopen its economy. The pessimistic IEA comments will likely weigh on oil prices, our bias remains to buy US$ for possible rebound towards 1.2850 level. Support at 1.2667 (Jan22nd) with minor resistance at 1.2745.

Euro dips from Thursday highs as US$ rebounds and holds at 1.21 level. EU vaccinations restart with fresh deliveries of vaccine doses and AstraZeneca planning to double its output. Germany announced improving coronavirus stats alongside many other EU countries reporting similar improvements on their virus stats. Italian politics are calming down as Five Star, Italy’s largest party in parliament voting to back Draghi as the new Italian PM. Having former ECB president Draghi as the new PM for Italy will help boost confidence in the Italian economy. Support at 1.2045 with resistance at 1.2145, if breached look for a test of 1.2190.

Eur/GBP remains unchanged, as both currencies stall with a strengthening US$. Hopes that discussion on NI protocol will remove the border checks and remove delivery delays. Our bias remains to see a retest of .8736. 

GBP straddles 1.38 amid a firming US$, Brexit disputes and UK GDP data. UK GDP +1.2% in Q4, but the UK contracted 9.9% in 2020, its largest contraction in +300 years (1709). UK & EU are seeing calmer heads prevail as temperatures cool and officials pledge to seek “workable solutions’ on the Northern Ireland protocol. Optimism for GBP remains primarily supported by the UK vaccination rollout strategy. Focus will be on US Michigan Consumer Sentiment report today for direction. Support dips to 1.3750, with resistance at 1.3865 (2021 high), if breached look for 1.3997 (26th Apr 18).