Monday June 28th, 2021

The US$ dips, oil prices hold steady, equity markets & US yields weaken as markets await US Jobs data on Friday. The US$ is broadly steady in early trading as global markets start the week on a cautious tone as currency markets shift their focus towards the key US Nonfarm payroll data on Friday. Asian markets strike a cautious tone as delta-covid cases spike across Asia & Africa, while Australia & Israel impose new restrictions, Europe restricts UK travelers as variant cases jump almost 50% in the UK and Hong Kong ban flights from the UK effective July 1st. In other news, the US President clarified his comments on Saturday helping get the bipartisan infrastructure bill back on track. The US launches strikes on Iran-backed militia facilities in Iraq and Syria which could impact the ongoing the US/Iranian nuclear pact talks. Currency markets remain under pressure as rising delta variant cases grow and markets await Friday’s Key US jobs data. CNY is flat while Asian currencies are mixed with THB, PHP & KRW fall 35% on average, while SGD & TWD are flat and outlier MYR rallies 0.25%. Trading currencies are mixed with JPY up 0.1%, AUD is flat while NZD & MXN weaken 0.2%, NOK falls 0.5% and ZAR tumbles 0.8%. Today with no key economic releases market will focus on NY Fed President John Williams comments after last week’s softer-than-expected inflation data.

Oil prices hold at 3-year highs with Brent Crude over US$ 76pb climbing for 5 consecutive weeks as demand optimism remains high. OPEC+ meet July 1st which may see a hike in August output, while the US/Iran are expected to resume their indirect talks over the Iranian Nuclear pact. C$ dips in early trading as delta variant cases rise and risk-on trading eases. C$ could be vulnerable to further weakness if current high oil prices are impacted if rising variant cases impacts current demand optimism. Support holds at 1.2248 if breached expect a C$ rally to 1.2152 next, with resistance holding at 1.2375.

Euro holds above 1.19 as volatility levels dropping too recent lows. Rising variant cases saw risk-on sentiment ease as fresh covid restrictions are being imposed globally. Focus will be on the ECB this week with markets expecting the ECB may follow the Fed in changing its dovish tone to more hawkish tone. Our bias remains to buy Euro on dips with the EU well placed for its economy to rebound. Support holds 1.1900, while resistance sits at 1.2030, if breached look for 1.2150 next.

EURGBP drops as Eur stalls while GBP rebounds from last week lows on Brexit optimism and its ongoing reopening strategy. Support holds at .8550 (1.1695) if breached look for .8495 Apr 5th (1.1770) with resistance remaining at .8665 (1.1540).

GBP rebounds but is still set for its worst month since September 2020. The UK remains on track for reopening despite rising variant cases, increasing bans on UK travelers and the resignation of UK Health Minister. The UK last week recorded their highest number of new covid cases since Feb 21, but the rise in vaccinations has weakened the link between infections and hospitalizations. Supporting the GBP is rising optimism for a resolution on the Northern Ireland protocol & a weaker US$, while the dovish BoE comments could contain further GBP strength. Support resets 1.3865, while resistance holds at 1.4000.