Monday October 25, 2021

The US$ is flat, oil prices edge higher, equity markets firm, while US yields are mixed after Fed Chair Powell said on Friday it is not yet time to begin to raise interest rates. Intraday expect markets to remain within current ranges with investors unlikely to pay attention to the Chicago Fed’s National Activity index and the Dallas Fed’s Manufacturing survey today. Investor focus shifts to Wednesdays Durable Goods Orders (sep) and Nondefense Capital Goods Orders ex Aircraft for market direction. In other news, House Speaker Pelosi said Sunday that Democrats are close to finalizing an agreement on the social spending plan which will allow the bipartisan infrastructure bill to move forward. Poland PM accuses the EU of making demands with a ‘gun to our head’. China expands its property tax trials in the next step of its ‘common prosperity’ drive. Sino-US relations remain tense as US intelligence officials warn AI & Biotech companies over concern Beijing is pushing to obtain data. Covid, Russia marks record number of covid deaths for a 5th straight day as it prepares for nationwide curbs. The UK resists new covid measures despite a spike in new covid cases. In China local travel restrictions and lockdowns are back to curb new covid outbreaks. In currency markets, Turkish Lira hits new lows after President Erdogan orders expulsion of 10 western ambassadors. CNY dips 0.05%, while Asian currencies are mixed with KRW, THB & SGD up 0.4% while INR, IDR & TWD are down 0.15% on average vs US$. Trading currencies remain active with MXN, JPY & NZD down 0.2%, while NOK is flat, AUD is up 0.3% and ZAR is up 0.45%

Oil prices extend gains towards multi-year highs as tight supply continues as fuel demand in the US and EU as economies recover form pandemic slumps. C$ cautiously edges higher in early trading as oil prices extend gains. Investor focus will be on Wednesday’s BoC rate statement and monetary policy report. Bias remains for C$ to extend gains vs its peers as oil prices remain firm and the prospect of a BoC rate hike into 2022 continues. Support holds at 1.2287, if breached look for 1.2152 (Jun 16th), while resistance holds at 1.2415.

Euro weakens towards 1.16 amid disappointing German IFO data. German IFO Business Climate (oct) and IFO Expectations both continued to deteriorate in October. According to the report ongoing supply chain issues are continuing to impact German companies and decreasing productivity levels. Expect Euro to hold within its current trading range with a light set of economic data releases in the US unlikely to impact markets today. Support holds at 1.1580, while resistance remains at 1.1670.

EURGBP weakens after disappointing IFO data releases and Brexit optimism for the GBP. Support remains at .8400 (1.1904) while resistance holds at .8490 (1.1778)

GBP holds near 1.3750 amid Brexit optimism and US yields recover. UK chief negotiator suggests at a compromise on the Northern Ireland’s post-Brexit trade rules. Over the weekend the PM’s office acknowledged that they had constructive talks with the EU over NI, but the Euro-court of Justice upholding/implementing trade rules remains a major issue in talks. A light day on economic data releases from the US today, so expect markets to remain within current trading ranges. Support resets to 1.3720, while resistance lowers to 1.3835.