Friday January 7th, 2021

The US$ is lower, oil extend gains, equity markets are mixed while US yields dip ahead of US Job data. The US$ retreated in early trading ahead of today’s key US Nonfarm payrolls (Dec) expecting to rise to 447k jobs (210k Nov) setting a 2021 record, and will likely reinforce the case for a Fed rate hike as early as March. In Europe inflation levels hits 5% in the 19 countries within the EU, its highest inflation level since records began in 1997. The high EU inflation levels could now compound problems for the ECB who have been attempting to keep interest rates unchanged in 2022. In other news. Japan and the US vow more defense cooperation to counter the Chinese threat. Top US & Russian diplomats will meet on Monday in Geneva to tackle the Ukraine tensions. France sees progress in Iran nuclear talks, but concerned that time is running out. China calls on banks to increase loans and support real estate developers. Covid. The UK calls in the military to help with hospital covid staffing crunch. The US Supreme Court considers whether to halt President Biden vaccine mandates. Mexico nears 300k deaths from covid as cases surge after holidays. In currency markets. Petro currencies firm as Kazakh turmoil adds to supply worries. Turkish Lira remains near 14 vs US$, Japan holds near 5-year lows vs US$ and CNY rebounds but remains set for its biggest weekly decline since Mid-Sept. CNY up 0.1% while Asian currencies are down 0.1% on average vs US$. Trading currencies are mixed with Aud & CHF are down 0.1%, while NZD & JPY are flat, MXN is up 0.3%, NOK firms 0.4% and ZAR rallies 0.7% vs US$.

Oil prices extend their gains with Brent Crude approaching US$83 pb on Kazakh political turmoil and Libya outages increasing supply worries. C$ recovers for its weekly lows vs US$ finding support from rising oil prices and data showing Canadian exports climbed to record highs. Today, a busy economic docket today with Jobs data in the US & Canada, as well CAD Ivey PMI will help provide intraday currency direction. Support at 1.2685 and resistance holds at 1.2795.

Euro holds near 1.13 as investors await the key US NFP report. EU inflation hits 5% a record high since records began in 1997, led by a surge in food and energy costs. The soaring inflation may cause the ECB to change their dovish tone to a more hawkish tone and could force the central bank to reconsider raising interest rates in 2022. Intraday US data will be a primary driver, if NFP falls short of expectations we anticipate Euro could retest recent highs of 1.1350. Support remains at 1.1250 and resistance holds at 1.1350.

EURGBP dips retesting lowest levels since Feb 2020 and remains vulnerable to further weakness as BoE/ECB interest rate policy diverge and limited UK covid restrictions continues to support the pound. Support lowers to .8340 (1.1990) while resistance resets at .8450 (1.1843)

GBP consolidates gains around 1.3550 as markets wait for the US NFP report. Domestically ongoing Brexit concerns and rising covid cases appear to be sidelined for investors as markets remain focused central banks stance on interest rate policies in 2022. Intraday US NFP will be the primary market driver for currency markets today, a strong NFP report could put short-term selling pressure on the pound. Support holds 1.3460 and resistance holds at 1.3560 with 1.3600 remaining the key psychological level.