Friday January 15th, 2021

Equity and oil prices ease and US$ strengthens as risk-off sentiment returns. President Elect Biden rolled out his US$1.9 trillion stimulus plan which will have its challenges as it will require bipartisan support to pass. The Fed reserve chair said that “now is not the time” to be talking about changing the Feds’s asset purchases. The Fed’s comments and fiscal stimulus challenges will likely take some momentum away from a stronger longer-term US$ scenario. Sino/US tensions continue as the White house administration imposed further sanctions on Chinese officials, Chinese companies and an investment ban on 9 more Chinese firms yesterday. As coronavirus deaths in the US approaches 400k, President elect Biden urges swift action on aid and improvements to vaccine rollout strategy. CNY held flat vs US$ finding support from strong domestic growth data, offsetting the strengthening US$, while Asian currencies dropped 0.2% vs US$. Trading currencies came under selling pressure with MXN, AUD & NZD down 0.5%, NOK down 0.7% and ZAR fell 1% vs US$. After yesterday’s US Jobless claims disappointed by jumping to 965k, investors focus shifts to US Retail Sales and Michigan Consumer Sentiment Index for direction.  

Oil prices came under selling pressure down -1.5% as Chinese lockdowns and weak US Job claims data increased demand concerns. C$ rebounds from Thursday’s highs 1.2625 as oil prices weaken and US$ rebounds as risk-off sentiment returns. Couche-Tard plans US$3.6bln investment to support Carrefour bid. CIBC Senior Economist Mendes said A wave of spending in essential services deferred due to the covid-19 may help drive the Canadian economy into a “rubber band-type” rebound later this year. C$ has room to weaken in the short-term as markets anticipate further oil price weakness. Support lowers to 1.2665, with resistance at 1.2735, if breached look for 1.2800.

Eur edges lower amid a stronger US$ and domestic covid concerns. Lockdown measures continues to keep Euro under pressure as France lowers its curfew to 6pm, Spain & Germany expected to increase tighter restrictions and Italy faces political crisis. Germany surpasses 2mio coronavirus cases and the death rate approaches 45k, the German Chancellor demands “very fast action” to curb the virus spread. Focus shifts to US data releases for intraday direction. Support holds at 1.2080 and resistance at 1.2205.

GBP set a new 2021 high at 1.3709 with its vaccination efforts supporting a stronger GBP. High vaccination rates is helping the pound to buck the trend against a stronger US$ as markets ignore current UK economic conditions. The UK economy shrank in Nov (GDP -2.6%) for the first time since spring as tighter lockdown measures impacts all aspects of the economy. The UK Finance Minister warns “things will get harder” as renewed lockdown mount in Q1 and further Brexit disruptions are expected. The UK PM’s leadership is under pressure as conservatives press for him to loosen lockdown measures.  Support holds 1.3600, with resistance 1.3709 (2021 peak).