The US$ dips, oil prices edge higher, equity markets are mixed, while US yields strengthen as risk-off mood continues. Markets are consolidating after a volatile week with Fed speech, rising global covid cases and increasing lockdown measures prompting markets risk-on sentiment. Rising US yields, increasing global covid cases should provide an underlying support to the US$ as markets remain cautious into a flurry of key US data next week. In other news, President Biden to encourage the FCC to revive net neutrality, and is urging more scrutiny on tech mergers and data privacy. G20 ministers & central bankers to meet to discuss the global minimum 15% tax rate in Venice over the weekend. The US is set to add more Chinese companies to its blacklist over Xinjiang. China cuts its reserve ratio by ½% point in an effort to boost its economy. SF Fed Daly warns the Delta variant poses threat to global recovery and fears ‘premature’ declaration of victory against covid-19. The World Health Organization commented that the 4 million death toll from Covid “likely underestimates’ the real global figure. In the currency markets, CNY is flat, while Asian currencies are down 0.1% on average vs US$. Trading currencies are mixed with JPY down 0.3%, while NZD is flat, AUD & NOK are up 0.25%, MXN firms 0.4%, ZAR strengthens 0.5% vs US$. Intraday focus will be on the Fed Monetary Report and the ECB Monetary Policy Meeting Accounts.
Oil prices firms as US inventories decline, but the OPEC+ impasse will likely cap any short-term rallies as uncertainty remains over global supply. Fears of rising covid cases could also become a driving force as more countries adopt fresh lockdown measures. C$ rebounded from a 10-week low of 1.2590 as oil prices strengthen, but ongoing covid concerns and lowering risk appetite may keep pressure on the C$ for the short-term. It is a busy day for Canadian data, the CAD unemployment rate is expected to improve to 7.7% from 8.2%, with Net Change in employment June to +195k vs -68K in May. If the jobs numbers miss expectations, we could see C$ come under further selling pressure. Support resets to 1.2470, resistance rises to 1.2650.
Eur consolidates around the 1.1850 vs US$ as the risk-off mood continues. ECB President Lagarde speaking today is expected to provide clarity to the ECB’s shift to a symmetric inflation target policy. Rising delta variants across the EU is seeing increasing travel restrictions between EU countries and will slow the eurozone economic recovery. Euro will likely consolidate today and remains vulnerable to further weakness primarily driven by rising covid cases across the EU. Support at 1.1785 with resistance at 1.1890.
EURGBP holds steady as markets consolidate after a busy week. GBP will likely remain under pressure ahead of July 19th reopening date. Support holds at .8550 (1.1695) if breached look for .8495 Apr 5th (1.1770) with resistance remaining at .8665 (1.1540).
GBP holds below 1.38 amid disappointing GDP data. The UK’s economic rebound slowed in May despite lifting of covid restrictions. The UK & EU clash over the GBP40bln Brexit ‘divorce’ cost and the UK is challenging the EU’s calculations. UK plans to scrap quarantine for non-UK vaccinated arrivals within weeks. The pound remains under pressure despite reopening due to rising delta variant cases, ongoing Brexit issues and with market sentiment turning to a risk-off strategy. Support resets at 1.3750 while resistance resets to 1.3840.