Monday April 26th, 2021

The US$ dips, oil prices fall, US yields are higher, while equity markets are mixed as risk on mood returns. The US$ holds near 8-week lows, down 2.7% MTD as the US$ remains under pressure after the Feds “lower for longer” view on interest rates. The US$ remains on the backfoot as markets focus on recovery optimism with Italy & France reopening, strong US & UK vaccinations vs surging global covid cases. Intraday the markets will be focusing on US durable goods which is expected to rise from -1.2% previously to +2.5%, which will set the stage for a busy week of US data releases and the FOCM rate decision this week. The US President will be addressing Congress on Wednesday which will give him a chance to make his case for the US$2.3T infrastructure package and his new tax proposals. In the Currency markets the US$ remains under pressure, CNY is up 0.2% while Asian currencies are up 0.15% on average. Trading currencies are stronger with JPY & ZAR are up 0.2%, NZD up 0.5% and AUD rallied 0.6% while NOK & MXN are flat as oil prices weaken. Intraday US data releases and covid updates will provide market direction today.

Oil prices drop -1.5% as covid cases continue to surge globally, with India reporting +1million new cases in the last 3 days. Alongside virus demand concerns, Libya oil supply has come back online, and OPEC will be increasing supply in May through July. C$ extends its gains vs US$, C$ is up almost 1% vs US$ MTD. Canada is pressing the White house to keep the Great Lakes oil pipeline open with the May13th deadline quickly approaching. The US$ remains weak into the FOMC, but surging covid cases and falling oil prices will likely have a negative impact on C$, our bias is to buy US$ on this dip. Support at 1.2425 with resistance lower at 1.2515. 

Euro holds near 1.21 amid a weaker US$ and disappointing German IFO data. Eurozone vaccination optimism and easing lockdown restrictions in Italy & France provided the Euro a boost despite weaker than expected German IFO data. On a positive note, Germany rises its 2021 economic growth forecast to 3.5% vs 3%. The ECB’s tone is changing with increasing signs of optimism as it upgrades its risk assessment to balanced vs towards the downside. Intraday expect markets to remain contained as they await Wednesday’s FOMC. Support rises to 1.2035 and resistance resetting at 1.2125.

EURGBP is up 2.1% MTD but dips intraday as the GBP strengthens vs EUR weakness after the pound rebounds on optimistic BOE comments and the UK passing 50% of population receiving their 1st inoculation. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP rises as risk on mood increases and the US$ weakens. Market optimism increases as Europe the UK largest trading partner starts to loosen its lockdown restrictions. The UK passes the key 50% milestone of its population receiving their first vaccination dose. The EU/UK Northern Ireland Brexit negotiations continue with signs of a breakthrough growing. Adding further positive fuel to the fire BOE saying that they see “very rapid” growth at least during the next couple of quarters. Support rises to 1.3850, while resistance holds at 1.3940.