Monday November 1st, 2021

The US$ is flat, oil prices firm, equity markets and US yields are up amid a cautious currency market mood. The US$ holds steady vs a basket of major currencies as markets wait for Wednesdays FOMC meeting as Fed tapering expectations increase. Intraday the US$ is expected to remain firm as it awaits the ISM Manufacturing PMI (Oct) is expected to ease slightly to 60.05 vs 61.1 previously. In other news, COP26 begins in the UK, President Biden is set to speak where he is expected to say that the US will slash greenhouse gas emissions by more than half by the end of the decade. Britain tells France to backdown within 48 hours over the fishing dispute or face tortuous legal action under the Brexit trade deal. In a rare public statement on Sunday, China said it was releasing gasoline and diesel reserves to boost market supply and stabilize prices. UK. Covid, Thailand, Australia & Israel ease their travel curbs for the first time in 18 months. NY prepares for the fallout from the vaccine mandate with many police and firefighters still refusing the vaccine shot. Global covid deaths hit 5 million according to data collected by John Hopkins University Monday. In currency markets, AUD dips ahead of the RBA meeting, GBP eases on growth worries and China’s CNY firms after its best month (oct) since June – CNY is up 0.13%, Asian currencies are down 0.15% on average vs US$. Trading currencies are mixed with JPY & AUD down 0.2%, MXN weakens 0.65%, ZAR tumbles 1% while NOK is flat and NZD is up 0.1%, vs the US$.

Oil weakened in early trading after China announced it would tap its state fuel reserve while national refiners ramp up output sharply to avert a diesel shortage for the worlds 2nd-largest oil user. Oil prices rebounded in the Euro trading session as OPEC is expected to keep supply limits in place at their meeting on Thursday. C$ rallied almost 2.5% in October vs US$ and edges higher today in thin trading as oil prices rise. Bias remains for further C$ strength in Nov with hawkish BoC expectations, firmer Cad yields and ongoing firm oil prices. Intraday CAD Manufacturing PMI and US Manufacturing PMI data will provide direction to the markets. Support (minor) 1.2330, if breached (Key) 1.2287 next, while resistance at 1.2425.

Euro holds above yearly lows but remains vulnerable for further weakness. Euro remains under pressure amid firmer US treasury yields as markets focus on the FOMC and the prospects of Fed tapering action. The divergence of the Fed / ECB policies which will likely see interest rates rise in the US in 2022 while the ECB are not expected to raise rates until 2023 will keep pressure on the Euro. Today US October ISM Manufacturing PMI will provide intraday direction to the markets. Support resets 1.1524 (2021 Low) if breached look for 1.1450 next. while resistance at 1.1600.

EURGBP rebounds as Brexit and growth concerns puts pressure on the pound in early trading. Support remains at .8400 (1.1904) while resistance holds at .8490 (1.1778)

GBP continues to slip amid Brexit and growth concerns. The UK/French fishing row continues to intensify, with the UK threatening legal action if France doesn’t stand down in the next 48 hours. The NI Protocol tensions continue to rise with the UK continuing to press for further renegotiation over the agreement. Growth pressures in the UK is causing concerns that the slowing growth may impact the prospect of BoE rate increasing into 2022. Support resets to 1.3630, if breached look for 1.3570 next, while resistance lowers to 1.3720.