Friday January 29th, 2021

US$ safe haven holds steady as risk on sentiment stalls as investor confidence is shaken as retail trading volatility increases. The CBOE market volatility (VIX) had its biggest one-day drop yesterday since March 30th as retail-trade craze from GameStop and other “hot stocks”. House Speaker Pelosi says the House will take first steps towards passing the covid US$1.9T stimulus relief next week, with or without the GOP. CNY extends its strength amid tight liquidity and driving rates higher, the CNY strengthens 0.35% vs US$ while Asian currencies are up 0.1% on Average. Trading currencies are mixed with JPY down 0.45%, AUD flat, NZD up 0.36%, MXN up 0.45%, NOK rallies 0.9% and ZAR leaps 1.2%. Focus shifts to a flurry of US data releases including Chicago Purchasing Managers Index, Michigan Consumer Sentiment Index, Pending Home sales, Personal Income and core Personal Consumption Expenditure. Also, we will hear from US Treasury Sec Nominee Yellen and Fed’s Kaplan both speaking today. 

Oil prices remains steady as covid demand worries are offset by supply output cuts. Saudi Arabia is set to cut its output by 1mio bpd in February and March in compliance with its OPEC agreement. C$ holds steady but fails to strengthen as oil rebound and looks vulnerable to further weakness. Ottawa is expecting to get 56% few doses as Pfizer vaccine delays are longer than expected. Focus shifts to Canadian GDP, oil prices alongside Treasury Sec nominee Yellen speech for intraday direction today. Support builds at 1.2755, with intraday resistance at 1.2835 if breached expect 1.2881.

Euro bounces off intraday lows amid upbeat German GDP and stable interest rate comments. German GDP saw 0.1% growth in Q4 vs expectations of 0% expected. ECB’s Makhlouf commented that a rate cut is not warranted right now, but it remains an option as uncertainty remains high. Makhlouf went on to say they are cautiously optimistic about the economic outlook and are keeping a very close eye on euro strength. European equity markets look set for their worst week since October over concerns over slow rollout of vaccines and US retail equity trading frenzy. Support holds at 1.2085 with resistance at 1.2180.

GBP’s roller coaster volatility continues with the pound trading between 1.3640-1.3740 in the last 24-hours. The conflict between risk-off US$ strengthening vs domestic confidence in the UK’s vaccine strategy has been the driver for the GBP’s volatility. The coronavirus in the UK is improving, but restrictions are expected to continue into March as vaccinations continue. GBP has held up better than its G10 peers and focus shifts to Feb4th BoE monetary policy decision.  Support at 1.3640 with key resistance at 1.3792 (April 2018).