Monday May 10th, 2021

US$ dips, oil prices edge higher, equity markets are mixed and US yields are flat as markets focus on post-NFP markets. Fridays Nonfarm Payrolls fell far short of expectations highlighting the Fed’s stance to keep rates lower for longer and keeping pressure on the US$. Fed Kashkari commented that the economy is still in “a deep hole”. Evans of the Chicago Fed speaks later today, while investors shift their focus to inflation and consumer data later this week. President Biden will be meeting with GOP leaders on Wednesday after saying he is “ready to compromise” on infrastructure spending. Gasoline futures rise after Friday’s cyberattack on the US Colonial pipeline. In currencies, the US$ holds near 2 ½-month lows while Euro, GBP, AUD & CAD all hit multi-month/year highs. CNY hits a 14-month high underpinned by a weaker US$ with the Chinese central bank monitoring the CNY strength. CNY strengthens 0.3%, Indonesia Rupee (IDR) rallies 0.6%, while Asian currencies strengthen 0.2% on average. Trading currencies are mixed with JPY down 0.15%, while NOK & MXN rise 0.1%, NZD is up 0.25%, ZAR strengthens 0.4% and AUD rallies 0.5% vs US$. Markets will focus on commodity prices and Fed comments for intraday direction.

Oil prices gain after US Colonial Pipeline shuts its fuel pipeline due to a cyberattack on Friday, raising concerns about further supply distribution. Colonial pipelines disruption is critical as the company moves a significant percentage of oil on the east coast. C$ continues to strengthen on the combination of a US$ weakness alongside strengthening oil and core commodities. Momentum continues to favour C$ as it posts 6 straight weeks of gains and tests a new high of 1.2090 in early trading today. Support (Key pivot) at 1.2057 (Sep2017) with resistance dropping to 1.2200. 

Euro advances amid dollar weakness. The Feds action is keeping the US$ weaker which will stress the ECB as Europe attempts to rebound its economy. ECB member Ollie Rehn wants to adopt the Fed’s approach, if adopted it would have a weakening effect to Euro. The ECB will likely want to address a stronger Euro which will impact the EU’s economic rebound with rising export costs. No key market data releases today, so expect Euro to fluctuate around the US$ ebbs & flows. Support holds 1.2100 and resistance at 1.2200.

EURGBP tumbles as GBP strengthens post UK elections raises optimism for the pound. Analysts remain bearish Eur looking for a potential move towards 0.83 (1.2048) vs GBP into H2/2021. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP rallies towards 1.41 hitting a fresh 3-month high vs US$. The pound strengthened on a combination of the US$ remaining under selling pressure and positive UK election results. The Scottish National Party won a 4th term, but fell short of an absolute majority, which eases the worry of an immediate independence vote. In the UK the Conservatives strengthened its grip on power by gaining an additional key labour seat. The UK PM is expected to announce it accelerating its reopening timeline. Support at 1.4015, while resistance sits at 14130.