Friday September 18th, 2020

The US$ rebounds from its overnight lows as focus shifts to consumer sentiment report and US stimulus relief updates. Reps/Dems appear to be making some progress towards a new Coronavirus relief package, but a near-term deal still seems unlikely with each side having little incentive to compromise ahead of the elections. NZD hits 18-month highs vs US$ (up 0.4%) after positive economic comments from the NZ finance minister. Major currencies have given back some overnight night gains, while Asian currencies remain up about 0.15% on average vs US$. Despite stronger oil prices NOK, RUB, CAD and MXN are flat vs US$. The US Michigan Consumer sentiment index will be watch closely and will provide some intraday direction to the markets.

Oil prices strengthen on a combination of more storms building on the gulf coast and OPEC+ pushing for better compliance with output quotas. C$ recovered from Thursdays low (1.3247) on the strengthening oil prices, and also on comments from OPEC that it “sees signs of economic recovery in some areas, and signs of easing inventory surpluses”. In the todays news, Canada abandons trade talks with China, in a policy reversal the foreign minister said a free-trade pact no longer worth pursuing. Canadian Retail sales this morning for July is expected at 1.0% vs previous 0.7% as investors look for evidence of economic growth. Support at 1.3120, with minor resistance at 1.3210, if breached 1.3270 next.

Euro holds around the 1.1850 after the US$ slipped from yesterday’s highs. The growing threat for Euro remains the surge in new covid-19 cases across the continent. Spain, France, Italy and Germany have all reported spikes in new cases and the prospect of a potential 2nd lockdowns is growing. ECB Schnabel an ECB board member is speaking today, otherwise markets will focus on the US consumer sentiment report. Support at 1.1750, with resistance 1.1930, if breached 1.2010 (2020 highs)

GBP strengthens on a weaker US$ and buoyed by better-than-expect retail sales results. The Brexit pendulum continues to swing from fear to hope, after EC President said, “I am convinced a UK-EU deal is still possible”. Her comments alongside positive retails data helped boost GBP. Lurking behind the scenes are BoE’s dovish comments on the state of the economy on a no-deal Brexit, with the likelihood interest rates will turn negative for the first time. Rising UK Covid cases and Brexit remain the two key drivers for GBP over the coming weeks. Support 1.2850 with resistance at 1.3020.