Monday February 1st, 2021

Equity and oil markets are positive, US$ strengthens as investors focus on US stimulus. In a letter to President Biden, Ten Republican senators said they will unveil their proposed legislation on Monday, advocating a smaller coronavirus stimulus proposal and looking for compromise. Dow futures rise as the market looks set to rebound from its worst week since October as it hopes to shake off concerns over speculative retail markets. CNBC story saying new chart shows China could overtake the US as the world’s largest economy earlier than expected. Meanwhile Chinese NBS and Non-Manufacturing PMI both fell below expectations which saw CNY fall 0.64% vs US$. Asian currencies were mixed with IDR, KRW & MYR are up slightly 0.1% vs US while SGD, THB and JPY were down 0.25% on average vs US$. Trading currencies were mixed with NZD 0.2%, NOK down 0.6%, AUD is flat while ZAR rallies 1% and MXN leaps 1.35% vs US$. Markets will focus on the Rep’s US stimulus proposal, US ISM Manufacturing PMI and President Biden’s speech later in the afternoon.

Oil prices bounce from intraday lows boosted by a fall in inventories and optimism for rising demand. Goldman Sachs suggested oil prices could rise to $65 a barrel by July, forecasting a deficit of 900k bpd in first half of 2021. C$ retreats above 1.28 in early trading despite stronger oil prices and Fridays positive GDP data as safe haven US$ demand continues. Focus will be on Canadian Manufacturing PMI today, alongside oil prices, US stimulus updates and the US$ for short term direction. Support rises to 1.2750 with resistance at 1.2835, if breached then 1.2881 (2021 highs).

Euro weakens below 1.21 amid strengthening US$ and ongoing vaccine rollout delays. The vaccine supply delays saw the EU announce it would impose export controls on vaccines, basically a threat to prevent doses being sent to the UK. EU officials backtracked on Saturday saying it was a blunder and a mistake to invoke Norther Ireland Brexit Emergency powers. Today saw positive manufacturing PMI data from Spain, Italy, France and Germany, but German retail sales Dec (MoM) fell below expectation. Focus remains squarely on Europe’s ability to expand its vaccination efforts, while a weaker euro will support EU recovery.  Support lowers to 1.2051 (2021 lows) with resistance at 1.2145

GBP continues to edge stronger towards 3-year highs on optimism from the UK’s vaccine rollout. Despite the row between the UK & EU over vaccine supplies, the UK said it expect its supply shots would not be interrupted. Investors are focused on Thursday BoE’s meeting where it will publish the findings of a consultation on what negative rates would mean for the banks operations. UK Manufacturing PMI beat expectations, as well Mortgage approvals also beat market expectations. Support at 1.3640 with key resistance at 1.3792 (April 2018).