Monday February 8th, 2021

US$ rebounds, global stocks rally, Brent Crude +US$60pb and US Treasury yields rise. The US$ steadies in early trading after weaking on Friday from the US Jobs report which showed jobs growth rebounded less than expected in January. The weaker than expected job’s report highlights the argument for President Bidens relief stimulus to aid the US’s recovery from the impact of the pandemic. Treasury Secretary Yellen commented that she sees full employment by 2022 if President Bidens US$1.9T coronavirus rescue package is passed. US 30-year bond yield hits 2% as markets anticipate that US stimulus will fuel inflation. CNY strengthens 0.25% ahead of the Lunar NY holidays, while Asian currencies weakened 0.2% on average vs US$. ZAR weaken 0.8% as South Africa (SA) puts AstraZeneca vaccine on hold, after a trial showed that the vaccine did not significantly reduce the risk of mild or moderate on the SA variant. Other trading currencies were mixed with NOK stronger 0.2% on higher oil prices, while NZD down 0.15%, AUD & JPY fell 0.2%, and MXN is down 0.55% vs US$. No key US data today, so markets will remain focused on US stimulus and vaccine updates.

Oil prices continue to surge +1.5% in early trading as Brent Crude crosses the phycological US$60pb as supply cuts and US stimulus hopes boosts oil prices. C$ remains within its current range as strengthening oil prices are offset with a strong US$. On Friday, Canada lost 213k jobs with the unemployment rate hitting 9.4% in January. The current rate of vaccine rollouts within Canada is a concern for investors as it impacts Canada’s recovery efforts. We anticipate C$ will hold within its current range, with C$ remaining vulnerable to any oil price weakness, bias to buy US$ dips.  Support lowers 1.2720, with minor resistance at 1.2815 and key resistance at 1.2881 (2021 highs).

Euro holds steady below 1.2050 after rallying Friday on the weak US jobs data. ECB Lagarde will be speaking today at the EU Parliament; she will likely focus her comments on expectations for the upswing for the EU economy into summer. EU Sentix Investor confidence dropped to -0.2 vs expected 1.9, while German Industrial Production improved slightly -1% vs previous -2.5%. Ongoing delays in vaccination rollouts, as well as lockdowns across the EU will continue to hamper any short-term economic recovery. Bias remains to sell any Euro rallies for a retest towards lower 1.19’s. Initial Support at 1.1980, if breached look for 1.1925 (Dec1st) with resistance at 1.2055.

GBP slips below 1.37 on a strengthening US$ and South Africa halting AstraZeneca vaccine. The US$ strengthens on higher US treasury yields and US stimulus optimism, but investors remain bullish GBP. Investors are positive for GBP as the UK government vaccination program remains on track with +12million first doses to date. BoE comments last week provided GBP a boost after commenting that it would need 6 months’ notice before it could instigate sub-zero rates. The UK vaccination successes continue to drive investor confidence and in the short term our bias remains to buy GBP dips. Support rises to 1.3665 with minor resistance at 1.3720 and key resistance at 1.3792 (April 2018).