Monday January 25th, 2021

Oil prices up, US$ steady, European equity markets dip as US lawmakers focus on covid relief stimulus. President Biden is trying to head-off Republican concerns that his US$1.9T relief proposal as some lawmakers pushed for a smaller plan targeting vaccine distribution. Rep Mitt Romney said he would listen to the WH, but US$1.9T figure was “Shocking” and was not “the best thing” for the US economy long term. US Treasury yields dropped, while US$ safe haven held steady as the coronavirus relief spending package faces opposition from many Congressional Republicans. China-Taiwan tensions rise after Chinese bomber and fighter planes flew into Taiwan’s defense zone on Saturday. CNY is up 0.13% while TWD is down 0.15%, other Asian currencies are up 0.1% on average vs US$. Trading currencies saw JPY down 0.05%, NOK, MXN & AUD up 0.2%, NZD up 0.4%, while ZAR is down 0.6% on covid-variant concerns. Markets will focus on the FOMC interest rate decision on Wednesday. Intraday focus will be on Chicago Fed National Activity Index, ECB Lagarde, BOE Bailey, Chinese leader Xu Jinping and President Biden speeches today. 

Oil prices edges higher on supply jitters and US stimulus optimism are offsetting demand concerns from renewed lockdown measures. Libya halts exports due to pay disputes and Indonesia seized two Iranian vessels suspected of illegal fuel transfers. C$ starts stronger on firmer oil and US stimulus optimism but rebounds off its early highs of 1.2685. If US lawmakers push back on the size of the US$1.9T stimulus we could see oil & C$ come under fresh selling pressure. Support rises 1.2685, with minor resistance at 1.2715 if breached look for 1.2765 next.

Euro dips on weak German IFO data and caution on US stimulus negotiations. German IFO Business Climate, Current Assessment and Expectations all fell below expectations, highlighting economic concerns. Focus continues to be singularly focused on the US$1.9T stimulus plan as lawmakers push back on the size of the proposed stimulus. Focus now shifts to German Buda President and ECB’s Larage’s speech’s which will likely focus on EU’s economy in the midst of server lockdown measures and recession concerns. Support lowers to 1.2115 with resistance down at 1.2200.

GBP dips from its intraday highs as US stimulus concerns emerge. Investors are tapering their expectations as US lawmakers are getting set to challenge US Presidents US$1.9T stimulus plan. Supporting GBP remains its strong vaccination strategy and the UK falling covid cases. The House of Commons begins sitting today, and the UK PM mulls relaxing some virus measures before Mid-Feb. Focus now shifts to BoE Baileys speech today at the World Economic Forum even in Davos and will be looking for comments on the UK economy and policy updates. Support at 1.3620 with resistance at 1.3710 if breached 1.3792 (April 2018).