Friday September 11th, 2020

The US$ weakens, Sino/US tensions increase, election cyberattacks, and markets await US CPI data for fresh impetus. China’s foreign minister says he adopted reciprocal restrictions on staff from US Embassy and consulates in Mainland and Hong Kong. The US President said he will not extend the Sept 15th deadline for TikTok deal. Microsoft said it detected cyberattacks targeting US elections. CNY is flat vs US$ today but is set to strengthen for its 7th straight week vs US$. The ECB policy makers clamed market concerns which saw Euro strengthen. NOK rallies 0.75% vs US$ after officials forecast that its economy will contract less than expected. AUD & NZD rally boosted by a weaker US$ and a rallying Euro with both rallying 0.5% vs US$. Volatility remains for ZAR which strengthened 1% vs US$, as investors ignore economic concerns and flock to the ZAR for higher yields. Markets will focus on US CPI data released this morning as well as ECB chief economist speech for direction.

Oil prices continue to edge lower on an unexpected rise in US stockpiles and is on track for its 2nd weekly fall. C$ remains vulnerable for further weakness on falling oil prices and BoC governor’s comments that it would take recent strengthening of the currency into consideration when deciding policy. US data results and Oil prices will dictate intraday direction. Support at 1.3120, with minor resistance at 1.3210, if breached 1.3270 next.

Euro strengthens after the ECB statement in which the ECB president said that the central bank would “carefully’ monitor the exchange rate. The ECB comments were perceived as the weakest form of verbal intervention and calmed concerns of direct intervention if Euro strengthens. ECB Lane is set to speak today, but markets are not expecting any deviation from yesterday’s announcements. The primary focus for markets today will be the US CPI data to provide intraday direction. Bias for Euro to hold around 1.1800 in the near term. Support at 1.1745, with minor support at 1.1850, resistance remains at 1.1930.

GBP continues under pressure on failing Brexit talks, suffering its biggest selloff vs US$ since March. Markets are now bracing for a no-deal Brexit, but a glimmer of hope remains as the EU/UK are set to resume Brexit talks again next week. Counter to the Brexit concerns the UK industrial Production in July increased 5.25 MoM, Manufacturing Production rose 6.3% MoM and UK GDP report showed the economy had 6.6% growth in July. In the short-term Brexit will dictate direction, while Intraday investors remain focused on US CPI release. Support 1.2780 with resistance at 1.2910.