Friday February 19th, 2021

The US$ and oil prices are lower, US yield are up, while global equity markets are mixed as investors await US PMI data. The US$ came under selling pressure after Thursday’s US jobless claims increased to 861k, its highest level in 4-weeks and suggests the US recovery has stumbled. Focus remains on the administrations US$1.9T stimulus plan which could be approved as soon as next week. The US Treasury Secretary Yellen supports the major stimulus saying she sees a bigger risk in not doing enough. Any delay or reduction for the US stimulus relief plan will put additional pressure on the US$. In other news, President Biden is willing to start talks alongside the EU with Iran as Tehran’s sanctions deadline approaches. President Biden at G7 today will likely highlight that recovery will take sustained investment. G7 leaders will put a spotlight on vaccine donations to developing countries, but the US is not expected to send vaccines until supply improves. President Biden says he wants “competition with china, not confrontation”. This follows Tuesday’s FT article that China may ban rare earth technology exports on security concerns. CNY strengthened 0.5% while Asian currencies were just +0.1% stronger vs US$. Trading currencies rallied with ZAR, JPY, NOK & MXN all up 0.35%, NZD up 0.6%, while AUD rallied 0.9% vs US$. Aud strengthened on higher domestic yields and rising commodity prices. Intraday focus shifts to US Services & Manufacturing PMI.

Oil prices drop -1.5% as Texas energy firms start to come back online and the severe weather conditions ease. OPEC+ is also under pressure to boost output with oil prices at current levels. Markets will also watch any possible easing of Iranian sanctions which could also result in increased oil supply. C$ strengthened alongside its peers as the US$ weakened on disappointing jobs data. Stronger Canadian yields, increasing confidence in the government’s vaccination strategy, alongside strong oil prices has given C$ the edge vs US$. Focus shifts to Canadian retail sales data out this morning. The prospect of falling oil prices, our bias to buy US$ on dips. Support at 1.2605, if breached 1.2586 (Jan 21st low) with resistance at 1.2695.

Euro rebounds above 1.21 amid mixed PMI data and a weaker US$. Service PMI data remains under pressure due to current lockdown restrictions, while manufacturing & Composite PMI data beat expectations across Europe. Vaccinations across Europe are increasing but lags behind the US and UK, suggesting the EU economic rebound will slower than its peers. Focusing on the ECB’s concern for Eur strength and rising US yields will likely see keep the Euro toppish. Focus will be on US PMI data releases today. Our bias remains to sell Euro on rallies. Support rises at 1.2070 while resistance at 1.2165. Eur/GBP rebounded seeing Euro strengthen 0.3% vs GBP intraday. Support rises to 8630 with resistance holding at 8700.

GBP hits near 3-year highs amid a weaker US$ and mixed UK data. Markets ignored disappointing UK retail sales data and focused on improving consumer confidence and strong PMI data. Confidence for the UK’s economic rebound is growing as the UK vaccinated +16mio citizens and markets are now awaiting the UK PM’s announcement on easing of lockdown restrictions. On any easing of lockdown restrictions, we would expect further GBP strengthening. Support rises to 1.3950 while resistance also rises to 1.4030, with the next key resistance sitting at 1.4245 (19th Apr 2018)