Monday October 11th, 2021

The US$ and oil prices strengthen, equity markets are mixed while US$ yields firm as “risk-on” appetite eases. The US$ strengthens in early trading on a combination of easing of Sino/US tensions, soaring energy costs and Friday’s disappointing Nonfarm payroll raising Fed tapering uncertainty. US & Canadian markets are closed, so expect FX trading is expected to be light and market focus shifts to Wednesday’s US inflation data and FOMC minutes. In other news, Treasury Secretary Yellen says she is confident the US congress will pass minimum global corporate tax. US Crude prices hit 7-year highs as the global energy crunch continues. In Poland, 100k Poles demonstrate on Sunday backing EU membership amid fears Poland could leave the EU bloc. Covid, AstraZeneca antibody cocktail provides positive results in late-stage study to treat covid-19. Sydney reopens as Australia looks to live with covid-19. In currency markets, the US$ tests its highest levels vs JPY in nearly 3-years as investors remain confident the Fed will announce tapering at its next meeting in November. CNY weakens 0.1%, while Asian currencies are up 0.1% on average vs US, but outliers PHP and INR are down 0.45% vs US$. Trading currencies are mixed with JPY weakens 0.6%, MXN is down 0.25%, NOK is drops 0.35%, NZD is flat, while ZAR is up 0.1% and AUD rallies 0.45% vs US$.

US crude prices test their highest levels since 2014 as the energy crisis gripping major economies shows little signs of easing amid a pick-up in economic activity and restrained supplies from major producers. C$ extends gains vs US$ into a 4th-week as energy prices continue to surge, and the domestic economy maintains momentum. Canadian Thanksgiving holiday and US Columbus Day will likely see light FX trading today. Focus remains on oil prices and US CPI & FOMC minutes on Wednesday will be key for direction this week. Support resets to 1.2418 (Jul 31st), if breaks look for 1.2298 (Jul 6th) next, while resistance lowers to 1.2539.

Euro struggles to hold above 1.1550 as the US$ extend gains as investors bet that the US Fed will taper at their November meeting. Increasing “risk-off” sentiment will keep likely keep pressure on the Euro and favour the US$. ECB President Lagarde reiterated that they should not overreact to the current inflation spike in the EU and added that price increases are expected to remain “largely temporary”. Support at 1.1520, while resistance lowers 1.1605.

EURGBP dips after the BOE warns of higher interest rates. Support holds at .8460 (1.1820) while resistance holds .8580 (1.1655).

GBP extends gains vs US$ in light trading, despite ongoing Brexit concerns. GBP strengthens in early trading after BOE policymaker said that UK households must brace for “significantly earlier” interest rate rises. Mr. Saunders went on to say investors were right to be on faster increases in borrowing costs with CPI heading above 4%. Support holds at 1.3580 and while resistance resets at 1.3675.