Monday May 31st, 2021

The US$ is flat, oil prices rebound, equity markets are mixed, and US yields dip in thin trading with UK & US bank holidays. The OECD raised its global growth forecasts to 5.8% for 2021 and 4.4% for 2022. The OECD expects the US economy to grow at 6.9% in 2021 supported by its strong vaccination efforts and US stimulus expectations. The US Covid cases near pandemic lows as travel within the US picks up for the Memorial Day weekend. Iran and global powers resume potentially the final round of nuclear talks which could see Iranian sanctions lifted if an agreement is reached. In the markets China’s non-manufacturing PMI beat expectations while its manufacturing PMI missed expectations, Japanese Industrial Production y/y April came out at 15.4% dwarfing expectations of 3.5% and Japanese Housing starts rallied to 7.1% vs expectations of 3.5%. In the currency markets CNY is flat while Asian currencies up 0.1% with TWD rallying 0.5% vs US$. Trading currencies are mixed with NZD, NOK & MXN are down 0.15%, AUD down 0.25% while ZAR is flat, and JPY is up 0.1% vs US$. Expect markets to thin during North American trading with no US data releases and US markets are closed for the Memorial Day holiday. 

Oil prices rise 1% underpinned by strong demand expectations into H2 as economies reopen and summer travel is expected to increase. Markets expect oil price rallies to be limited with the potential of Iranian oil supplies and OPEC unwinding its output cuts will offset increasing demand. C$ advances from Fridays close as Brent Crude retests US$70pb and on expectations BoC will reduce its asset purchase program. Focus intraday will on Canadian Currant Account for Q1 and then on to Tuesday which will see Canadian GDP data for Q1/21. Support holds at 1.2045 with key pivot at 1.1916 (May2015) with resistance at 1.2150. 

Euro holds around 1.22 vs US$ amid US and UK holidays. Euro has traded in relatively quiet trading as markets await European CPI data results at 8am est. EU vaccination efforts continue as fears of rising covid variants may slow the EU’s recovery efforts. Eur has failed to extend beyond 1.2250 and we may see the potential for further consolidation with room for the Euro to weaken towards the low 1.21’s. Support lowers to 1.2130, while resistance resets at 1.2250.

EURGBP strengthens as GBP remains under pressure as covid variant cases rise, raising concerns about the UK’s ability to fully open. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP fails 1.42 and heads lower in thin holiday trading. Markets are shrugging off concerns of an overheating US economy but increasing covid variant cases in the UK is raising investor concerns. The spread of virus variants across the UK is raising concerns that the final stage of UK reopening may be delayed. Expect GBP to remain under pressure for a potential retest of 1.4 levels. Intraday support holds 1.4120, with key resistance remaining at 1.4235 (Feb2021).