Monday June 14, 2021

The US$ edges lower, oil prices rally, equity markets are higher, while US yields are mixed amid pre-Fed jitters. The US$ consolidates its gains after the greenback posted its biggest weekly rise in six-weeks as investors await the FOMC meeting (15th-16th June) that might signal a change in the outlook Feds monetary policy outlook. Economists’ consensus is that the Fed will remain on hold until 2023, but recent data pointing to a surge in US inflation may prompt an earlier tapering of its currency-depreciating stimulus. US House Speaker Pelosi said the new Senate scaled back US$1.2T infrastructure plan could be hard sell to President Biden. Internationally, NATO summit is being held in Brussels today and is expected to Brand China a security risk to the western alliance, following the G7 meeting which warns Russia on ransomware and criticizes china on its economic practices. In the Currency markets, CNY is down 0.05%, while Asian currencies are down 0.1% on average vs US$. Trading currencies are mixed with JPY down 0.05%, ZAR weakens 0.6% while AUD & MXN are up 0.12%, NZD strengthens 0.25%, NOK rallies 0.4% on stronger oil prices. No key data releases today, US Infrastructure and the FOMC will dominate markets this week. 

Oil prices tests +2 ½ -year highs, up 1% as demand improves and OPEC+ supply cuts remain in place. Oil prices extend their gains supported by economic recovery and the prospect of fuel demand growth as vaccinations in developed countries accelerate. C$ has been oscillating in 1.2050-1.2150 range, opening below Friday’s 4-week highs as markets balance a strengthening US$ vs continued oil strength. Bias remains to sell US$ on rallies for a retest of 1.19 levels, but a break of 1.2235 would negate our short-term C$ strengthening scenario. Intraday Cad manufacturing Sales data out, but within no key US data expect markets remain cautious ahead of the FOMC meeting. Support holds at 1.2050 with key pivot at 1.1916 (May2015) key resistance at 1.2235.

Euro holds above 1.21 as markets await this week’s critical FOMC meeting. Markets consolidates near 4-week lows for Euro as investors look for signals from the Fed on possible tapering actions. Meanwhile in the EU, ECB President Lagarde reiterated her stance that continued accommodation is still needed. The EU continues to open its economies as vaccination efforts expand and a weakening Euro will help its export driven recovery. Support holds at 1.2100, while resistance holds at 1.2200.

EURGBP holds steady up slightly after the UK delayed the last stage of its reopening. Expect the cross to remain sidelined as markets await the FOMC decision of Wednesday. Support holds at .8550 (1.1695) with resistance remaining at .8665 (1.1540).

GBP remains under pressure amid Brexit concerns and UK reopening delays. The G7 meeting highlighted the ongoing discord over the Northern Ireland protocol. UK PM delayed lockdown easing in England by four weeks as variant cases remain on the rise and put pressure on the pound. Intraday BoE Governor Baily will be speaking and is expected to maintain his hawkish tone despite the extended UK extending its full reopening. Support resets 1.4040, with resistance at 1.4200, key resistance holds at 1.4235 (Feb2021).