Friday October 29th, 2021

The US$ firms, oil prices are flat, equity markets are down, while US yields weaken as risk mood eases. The US$ firmed in early trading while commodity currencies eased on supply chain concerns, increasing global covid cases and worries after Thursday’s weak US’s Q3 GDP results. Intraday markets will be focusing on US Core PCE, Personal Spending, Chicago PMI and Michigan Consumer Sentiment Index for intraday direction. In other news, the EU GDP beat expectations growing at 3.7% in Q3/21. G20 meeting in Rome to commit to tackle ‘existential’ climate challenge, China’s XI attends by video link. China’s Evergrande makes coupon payment before its deadline. President Biden was dealt a setback as the House of Representatives abandoned plans to vote on the infrastructure bill. French Agriculture Minister says no progress in fishing talks with the UK. Covid, Thailand reopens to tourists with less than half of its population fully vaccinated. Poland’s total number of covid infections surpasses 3 million. The UK to remove the final seven countries from its covid travel ‘red list’. In currency markets, Euro spiked to 1-month highs vs the US$ but weakens to 1 year lows vs CHF. RUB is on track for its biggest monthly gain vs US$ in 2021.  CNY is down 0.1%, hitting near 2-week lows as state banks buy US$ while Asian currencies are up 0.1% on average vs US$. Trading currencies are under pressure with AUD & JPY down 0.15%, NOK falls 0.3%, NZD & MXN weaken 0.4%, and ZAR falls 0.75% vs the US$.

Oil prices are flat despite expectations that OPEC+ will keep oil supply tight. OPEC committee trimmed its forecast for global oil demand for 2021 and saw demand increasing in 2022. C$ holds steady near its 4-month highs supported by BoC rate optimism and oil prices holding near multi-year highs. Cad 2-year yields vs the US tested their widest levels since 2014 which added extra support for the loonie as investors search for higher yields. Alongside oil, intraday markets will focus on CAD GDP and a flurry of US data for direction. Support resets at 1.2287 next, while resistance lowers to 1.2380.

Euro briefly retests 1.17, but weakens ahead of US data releases. EU Q3 GDP grew by 3.7%, with Italy and France exceeding their respective GDP expectations, while Germany & Spain Q3 GDP both missed expectations. ECB President Lagarde disappoints markets and keeps pressure on the Euro as she pushed back against the potential of an interest rate hike by the ECB in 2022. Focus shifts to a flurry of US data release today including US Personal Income, Chicago PMI and Michigan Consumer Sentiment Index to provide intraday direction. Support resets 1.1580, while resistance rises 1.1720.

EURGBP weakens as the prospect of an ECB rate hike in late 2022 fades after President Lagarde’s comments on Thursday. Support remains at .8400 (1.1904) while resistance holds at .8490 (1.1778)

GBP is steady despite increasing Brexit tension. France says no progress on fishing talks with the UK. The UK decries France’s seizure of a British fishing boat and the UK summons the French ambassador. Meanwhile the UK is preparing for the fallout from triggering Article 16 and suspending the NI protocol. Despite the headlines the pound holds steady as investors remain focused the prospect of BoE interest rate hikes into 2022. Bias remains for a firmer GBP in the med-term, but Brexit issues could keep pressure on the pound in the short term. Support rises at 1.3725, while resistance resets at 1.3840.