Friday January 8th, 2021

Optimistic vaccine news and anticipation of more US stimulus helps sustain risk-on sentiment. Pfizer announced today that its vaccine works against both the British and South African virus variants. Rising bond yields is helping the US$ bounce off its multi-year lows, but the US$ momentum is slowing as focus shifts to the US Jobs data today. On the US political front, The US President released a statement condemning the Capital Hill attacks and assures a smooth transition of power on Jan20th. Markets continue “risk-on” sentiment after the Dem’s Georgia election wins, anticipating more US stimulus to follow. CNY rallies 0.22%, while Asian currencies strengthen just 0.1% on average vs US$. Trading currencies rebound with JPY flat, NZD up 0.15%, NOK & AUD up 0.2%, MXN up 0.34%, while ZAR rallies 1.3% vs US$ after the Pfizer vaccine comments. Intraday markets will focus on US Jobs data for direction and later in the day Fed Clarida will be speaking. 

Oil prices are set for another weekly gain, hitting 11-month highs after Saudi Arabia pledged to cut its output by 1 mio bpd in Feb & March. C$ maintains its strength as Brent Crude advances towards US$55pb holding near its 2-year highs vs US$. The TSX closed at record highs on Thursday, while gold prices ease as US Treasury yields jump 1%. CIBC ‘s Deputy Chief Economist commented that “the BoC should be getting concerned about the atypical strength in the C$” and “carrying with it potential headaches for the domestic export sector and economy.” Intraday focus shifts to US and Canadian unemployment numbers for direction.  Support holds 1.2628 if breached 1.2522 (Apr2018) resistance remains at 1.2735.

Euro continues to edge lower as rising US Treasury yields helps boosts the US$. Domestically German trade balance fell below expectations, while EU unemployment came out better than expected at 8.3% vs 8.5% projected. The US$ continues to drive the Euro and focus will be squarely on US unemployment for direction. Support drops to 1.2205 (2020 closing level), a break could yield move towards 1.2115, while resistance lowers to 1.2285.

GBP bounces and retests 1.36 supported by vaccine optimism. Pfizer said its vaccine works against the UK’s the new covid-strain. The GBP advances despite a stronger US$ from rising US Treasury yields as markets focus on the UK’s fight against surging covid cases. Chief Exec of the National Health Services claims that the NHS is coping. The UK PM said they have secured 5mio does of Moderna coronavirus vaccine and has the capacity to deliver hundreds of thousands of vaccines per day by 15 Jan. In an attempt to tackle surging virus cases, the UK now requires test for all incoming travelers. Support 1.3515, with resistance at 1.3690, if breached look for 1.3773 (May2018).