Monday January 4th, 2021

Risk-on sentiment resumes as markets look beyond surging virus numbers, slow vaccine deployment and US political concerns. Global virus cases surpass 85mio as the roll out of vaccines run into manufacturing issues and overstretched resources impeding the speed of the vaccine delivery. Within the US, politics continue to dominate market headlines ahead of Tuesday’s Georgia high-stakes Senate race. Overshadowing the Georgia vote is the WSJ article that the US President pressured Georgia Secretary of State to “find” votes. In the currency markets EUR strengthens vs GBP post-Brexit, CNY tests 2 ½ year highs strengthening 1% vs US$. Asian currencies strengthen lead by SGD & THB up 0.33%, and MYR up 0.4%. Trading currencies also strengthen with AUD & NZD up 0.15%, JPY & NOK up 0.35%, and ZAR & MXN both up 0.6% vs US$. Intraday US PMI data, US Fed comments and US Political updates will provide market direction.

Crude prices strengthen testing multi-month highs in anticipation OPEC will cap output at current levels in February. Oil prices advanced in line with broader markets on hopes that the coronavirus vaccines will drive an economic rebound in 2021. C$ strengthened in early trading, testing its multi-year high on strengthening oil and a depreciating US$. Intraday Canadian Manufacturing PMI, OPEC meeting and US Manufacturing PMI will provide direction. Support shifts to1.2684 (Dec17th) resistance lowering to 1.2830.

Euro spike’s +1% amid a weakening US$ and strengthening European manufacturing PMI. A result over 50 for manufacturing PMI is perceived as a positive and today saw EUR, Italy, France, Germany and the UK all post plus 50 results. Surging coronavirus cases and the slow distribution of vaccines remains a primary concern for EU leaders. US political developments, US Manufacturing PMI data and Fed speeches will be watched closely for intraday direction. Support at 1.2125 with resistance rising to 1,2294 if breached look for 1.2350.

GBP holds onto recent gains as investors look beyond current Brexit teething issues and investors continue to unwind US$ positions. The UK PM is under pressure to enact a nationwide lockdown as new cases spike across the country. The approval and roll out of AstraZeneca vaccine is a positive, but the speed of the vaccine distribution remains a primary concern.  All in all, GBP optimism may be limited in the short-term as current conditions and US political uncertainty may see a return to US$ safe haven buying.  Support 1.3515, with resistance at 1.3773 (May2018).