Monday July 12th, 2021

The US$ strengthens, oil prices fall, equity markets are mixed, and US yields dip amid delta variant concerns and ahead of Tuesday’s US inflation data. The spread of the Delta variant is casting a shadow over a global economic rebound, with investors exiting riskier assets. Australia reported its highest daily totals, many EU countries are tightening their restrictions, the Netherlands reports a 800% increase in covid cases, while the US saw covid infections up almost 60% which is causing a shift to safe haven US$. Investors are focused on Tuesday’s key CPI with some economist thinking that US inflation has peaked. Wednesday, Fed Chair Powell will be testifying, and his comments will be monitored closely. In other news, the US Senate returns and President Biden braces for challenges to his multi-trillion infrastructure plan. The G20 backs global corporate tax, but the EU delays a digital levy plan in a move intended to defuse US criticism and ease the path to a final agreement. The ECB to expected to change its policy guidance at its July meeting, to tolerate inflation rates higher than its 2% goal. In the currency markets, AUD weakens as lockdown restrictions are extended and ZAR weakens as domestic unrest spreads. THB bounces above Friday’s lows after losing 5% MTD, with the Central bank warning about rising covid cases. CNY dips 0.12%, while Asian currencies are down 0.2% on average vs US$. Trading currencies are under pressure with JPY flat, AUD weakens 0.3%, NZD & MXN fall 0.55%, NOK tumbles 0.75% and ZAR collapses 1.6% vs US$. No key economic data releases today, so expect markets to consolidate ahead of Tuesdays US inflation data.

Oil prices fall over 1% amid OPEC+ uncertainty and demand concerns as covid cases restrictions return. The OPEC impasse continues and is stoking fears of another price war after the UAE rejected a proposed 8-month extension to the OPEC+ output curbs. C$ gains on Friday from its strong Canadian jobs growth has been lost in early trading as oil prices weaken causing the loonie to retest 1.25 levels vs US$. Oil prices will dictate intraday direction ahead of Tuesday’s US inflation data. Support resets to 1.245, resistance lowers 1.2540.

Euro retest’s 1.1850 amid ECB Lagarde’s dovish comments. The ECB President Lagarde commented that she is guardedly optimistic for a world economic rebound, but see’s uncertainty from the Delta variant. Lagarde went on to say she still sees a V-shaped global economic recovery and highlighted that the ECB policy will change in July. Increasing covid cases across the EU despite rising vaccination levels is a setback for the continent and will keep pressure on the Euro. Intraday expect markets to stabilize ahead of Tuesdays US CPI data. Support at 1.1785 with resistance at 1.1890.

EURGBP strengthens with the pound remaining under pressure ahead of July 19th reopening date. Support holds at .8550 (1.1695) if breached look for .8495 Apr 5th (1.1770) with resistance remaining at .8665 (1.1540).

GBP weakens in early trading amid reopening concerns. The UK PM is expected to announce today the end of covid restrictions on July 19th “Freedom Day”, but markets believe some restrictions may remain in place. Covid cases across the UK remain elevated, the UK economic recovery has slowed so this week’s flurry of UK data releases will be key to dictate the pounds direction. Support resets at 1.3750 while resistance resets to 1.3840.