Monday October 19th, 2020

Renewed US stimulus hopes, and strong Chinese data helps currency and equity markets strengthen. The House Speaker sets Tuesday as a deadline to reach a stimulus deal, but highlighted lack of agreement by then would mean no stimulus deal before the election. Chinese GDP grew Qtr vs Qtr, Industrial Production up 6.9% and Retail Sales exceeded expectations helping CNY to strengthen 0.2%. Asian currencies strengthened 0.15% on average on the positive Chinese economic data. Trading currencies JPY up just 0.05%, while MXN up 0.3%, AUD up 0.35%, NZD up 0.55% with NOK & ZAR up 0.6%. Intraday US Stimulus updates will be key, as well speeches from Fed Chair Powell and ECB’s President Legarde will be watched closely. 

Oil prices remain under pressure from ongoing demand concerns as covid cases continue to rise and Europe increases lockdown measures. C$ strengthened as risk-on sentiment returns on fresh US stimulus news. Intraday BoC Business Outlook Survey and US Stimulus updates will be followed closely. Bias remains to buy US$ on dips with expectations that Oil will remain under pressure through to year end. Support 1.3140, with resistance at 1.3220, if breached look for possible extension to 1.3340 (oct 7th). 

Euro strengthens through 1.1750 on rising risk sentiment on fresh US stimulus hopes. Nancy Pelosi’s comments on Sunday renewed market hopes of a US Stimulus deal ahead of the US elections. Capping Euro’s rally remains the rising coronavirus across the EU and the knock-on pressure the domestic economies. The ECB President is speaking today, and expectations are that she will continue her message of economic growth concerns amid the pandemic. Bias remains to sell EUR rallies. Support at 1.1670, if breached expect 1.1610 (Sep25th), with resistance at 1.1800.

GBP jumps above 1.30 on the prospect that Brexit talks could resume, and coupled with a weaker US$ on renewed stimulus hopes. Speculation is that the UK may resume Brexit talks and they will likely dilute the controversial Internal Markets Bill. A major obstacle will be fishing rights with the French President warning that the UK will need to step-down otherwise there will be a no-deal Brexit. Also weighing on GBP remains coronavirus concerns, fears of negative interest rates and the prospect of a Moody’s credit downgrade. Brexit remains the GBP’s primary driver. Support 1.2830 with resistance holding at 1.3050.