Monday July 19th, 2021

The US$ strengthens, oil prices tumble, while equity and oil markets are weaker as risk-off sentiment grows. The safe-haven US$ gains ground, while equity markets are on their worst run in 18-months amid a global covid surge. The US$ index rallies to near 4-month highs as investors expressed skepticism over the potential for a strong economic rebound as covid cases surge globally.  In other news, US senators seek to move ahead with the US$1.2T bipartisan infrastructure package and have dropped the provision to beef up tax enforcement. OPEC+ reaches a deal to boost output levels and sees oil prices fall. “Freedom Day” in England, restrictions end as covid cases explode, but related covid deaths remain low.  In the currency markets, trading currencies retreat as investors are returning to the US$ as they price in a return to a global slow down. Trading currencies continue under sustained selling with AUD hitting 8-month lows, NOK hits 9-month lows, while safe-haven JPY strengths back to 1-month highs vs US$. CNY weakens 0.1% while Asian currencies fall 0.4% on average vs US$. Trading currencies saw JPY rally 0.35%, while MXN is down 0.5%, ZAR, AUD & NZD fall 0.65% and NOK & CAD plunge over 1.1% vs US$. No key US$ data so markets will be focused on Delta-covid and US Infrastructure package updates.

Oil prices tumble over 2% after OPEC+ reached a deal on Sunday to phase out production cuts by 400k bpd on a monthly basis from August, and ending all cuts by September 2022. C$ freefalls over 1% in early trading to February lows as the loonie suffers a double whammy of falling oil prices and a return to a safe-haven US$ buying. Bias grows to sell US$ on moves towards 1.30 as rising vaccination levels and falling covid fatalities should support C$ in the med-term. Support rises to 1.2737 (minor), if breached look for 1.2652 while resistance resets to 1.2845 (Feb4th), if breached look for 1.2955 (Dec21st)

Euro breached 1.18, testing April lows as risk-off US$ buying continues. Euro hits near 4-month lows as the US$ extends its gains amid growing covid cases and rising US inflation levels. The ECB meets on Thursday with rising covid cases supporting the central banks cautious stance on tapering. Overall, the risk-off mood in the markets will keep pressure on the Euro vs US$. Support holds at 1.1750 with resistance remains at 1.1870.

EURGBP edges higher as rising cases in the UK casts a shadow over England’s “Freedom Day” reopening. Support holds at .8550 (1.1695) if breached look for .8495 Apr 5th (1.1770) with resistance remaining at .8665 (1.1540).

GBP drops to 3-month lows as England’s ‘Freedom Day’ is marred by soaring covid cases. England reopens even as covid cases soar, the health minister Javid tested positive for Covid and is self-isolating, while the UK PM and UK finance minister Sunak are required to quarantine. Prof Ferguson in a BBC interview said it was “almost inevitable” that daily infection rates would hit 100k within a week. Intraday, with no key data markets will remain focused on covid case again. Support resets to 1.3685 while resistance sits at 1.3800.