Monday April 5th, 2021

The US$ and US yields hold flat, oil prices drop, while equity markets strengthen as optimism grows following Friday’s strong US employment report. US Dems strive to push their US$2T infrastructure plan forward, but say they are open to debate with Reps on funding. The White house administration predicts that the infrastructure plan will create +19 million jobs over the next decade. The US$ index posted its best quarterly gains in almost 3 years from the improving US economy and rising US Treasury yields. The IMF and World Bank start their spring meetings today who’s focus is likely to be on the global covid pandemic’s economic impact as new cases spike in India and Brazil. Market liquidity remains thin with Easter Monday holidays across China, Europe and Canada which could increase market volatility. CNY and Asian currencies are flat vs US$. Trading currencies are mixed with JPY up 0.1% and AUD, ZAR & NZD up 0.15%, while MXN is flat, and NOK falls 0.15% vs US$. Markets will focus on US Services PMI and US Factory orders for intraday direction.

Oil prices drop 2% as markets return and play catch up to Thursday’s OPEC’s decision to ease output cuts between May & July. Increasing Price pressure is the anticipation of increased Iranian oil supply resulting from indirect talks between the US and Iran related to the attempts to revive the 2015 nuclear deal. C$ holds steady despite weakening oil prices as analysts raised their C$ forecasts expecting the loonie to benefit faster domestic economic growth. No key Canadian data releases today, so focus will remain on oil prices and US Services PMI data for direction. Bias is that we may see a short-term test of +1.26 as markets respond to intraday oil weakness. Support lowers to 1.2520 with resistance at 1.2615. 

Euro dips below 1.1750 amid 3rd wave lockdowns across Europe. The Euro remains on the defensive amid surging covid cases and ongoing pandemic-related lockdown restrictions across Europe. France cuts economic forecasts from 6% to 5% because of the pandemic impact from ongoing lockdowns on the French economy. Expect Euro to remain under pressure as investors gravitate to the US & UK as their economies show positive signs of growth over Europe. Support holds to 1.1710 while resistance resets at 1.1785.  

EURGBP falls 0.25% in early trading. The UK’s strong vaccination and reopening program continues support a stronger GBP scenario vs EUR. Support lowers  .8435 (1.1855) with resistance at .8540 (1.1710).

GBP extends gains and breaches above 1.3850 on optimism for its economic rebound. The UK launches a mass testing program to support the UK’s reopening strategy. The UK PM is also expected to confirm plans to relaunch international travel and accelerating re-opening for more sections of the economy in a speech later today. Analysts are predicting the GBP to rally towards 1.41 by the end of Q2/21. Intraday US Services PMI will dictate intraday direction. Support rises to 1.3810 and resistance resets at 1.3895