Monday May 3rd, 2021

Equity markets are mixed, oil prices and the US$ dip, while US yields holds steady as markets focus on US Manufacturing PMI data today. Markets are expecting a positive PMI number, which could set a positive tone for Fridays US NFP. The US$ remains under pressure suffering its fourth week of losses, its longest losing streak since the summer 2020 as investor optimism increases for global growth. The US Treasury Secretary urges Congress to fund the US$4.1 stimulus plans with a tax on the wealthy and says the stimulus plans won’t stoke domestic inflation. In other news, India reports its 12th day of +300k new coronavirus cases. Globally the US and China both report each country have administered +245 million & +275 millions of doses respectively. In Currency markets CNY is flat while Asian currencies dip 0.1% on average vs US$. Trading currencies remain mixed as ZAR rallies 0.45%, NOK strengthens 0.2%, while MXN, AUD, JPY & NZD dip 0.2% vs US$. Intraday first up is the US Manufacturing PMI data and then the Fed Chair will be speaking in the afternoon. 

Oil prices dips slightly as demand optimism bulls are offsetting rising covid cases in India which is the world’s 3rd largest consumer of oil. Indian oil imports tumbled to +20-year lows, while Indian businesses call on government to restrict non-essential economic activity. C$ holds steady around 1.23 level as it balances a weaker US$ vs weaker oil prices amid US & Canadian PMI data today. An FT article today “Canada’s muddled Covid response leaves it struggling with a 3rd wave”, as Canada cases per capita exceeds that of the US for the first time since the pandemic began. US & Canadian PMI data alongside oil prices will provide intraday direction. C$ current strength provides good opportunities to sell C$ and buy GBP, EUR, and other currencies. Support (Key pivot) at 1.2246 (Feb2018), if breached look for 1.2057 (Sep2017) while resistance sits at 1.2360, if breached expect a move back to 1.2430. 

Euro bounces off its lows on a weaker US$ amid disappointing PMI data. Manufacturing PMI data disappointed with all EU countries falling short of expectations which is a clear sign of the impact from the EU lockdown restrictions. The economic gap between the EU and US is widening as the US reopens on that back of its strong vaccination program. May Day holidays across several EU countries could see a risk of higher volatility in less liquid markets. Focus remains on US Manufacturing PMI data. Support dips to 1.2000 and resistance lowers to 1.2095.

EURGBP continues to stall at the key .8700 with many countries off for May-Day holidays. 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 bounces off 1.3800 amid US$ weakness and UK political uncertainties. The UK PM remains under sustained scrutiny over the apartment refurbishment and insensitive comments. A busy week for the UK with the BOE meeting, Scottish and the Mayor of London elections. The Scottish election will be watched closely as it could provide the Scottish National Party the opportunity to press for a fresh independence vote. Expect the pound to remain under pressure into the Scottish vote and the BOE meeting. Support at dips to 1.3800, while resistance lowers at 1.3885.