Monday September 13th, 2021

The US$ and oil prices strengthen, equity markets firm and US yields are mixed as Fed tapering expectations grow.  The US$ retests 2-week highs as market expectations grow that the Fed could taper its fiscal stimulus sooner despite a surge in US covid cases. The US has a flurry of economic data releases this week starting with the US CPI on Tuesday. The US CPI results will give guidance to the Fed on the US economy’s progress ahead of the FOMC meeting next week. In other news, Sen. Manchin says there is “no way” to pass the US$3.5T budget bill by September 27th. Chinese regulators tell domestic tech giants to end a long-standing practice of blocking each other’s links to their sites or face consequences. The IAEA reached an agreement with Iran on Sunday raising hopes for nuclear talks with the US. US Democrats are expected to propose raising corporate tax rate to 26.5%, up from the current 21% rate. Covid, the UK announced it would abandon the idea of a vaccine passport. New Zealand PM extends lockdown in Auckland to Sep 21st. The UK PM will set out plans on Tuesday on how he plans to manage the covid pandemic into the winter months. In currency markets, safe-haven US$ extends gains vs a basket of major currencies ahead Tuesdays US CPI data release. CNY weakens 0.2%, Asian currencies are down 0.25% on average while outlier THB drops 0.6% vs US$. Trading currencies are mixed with AUD & MXN are down 0.1%, NZD, ZAR & JPY weaken 0.15%, while outlier NOK rallies 0.35% vs US$ as oil prices rally.

Oil prices firm as US supply concerns remain as US Gulf Coast energy firms slowly restart after the impact from Hurricane Ida. The prospect of renewed talks between the US & Iran could lead to an easing of Iranian oil sanctions in the future. C$ is stable despite strengthening oil prices as investors hesitancy appears to be creeping into the markets as uncertainty grows ahead of the September 20th election. No key economic releases today so markets will remain focused on oil prices and election updates for intraday direction. Support resets to 1.2625, while resistance holds at 1.2720.

Eur drops below 1.18 in early trading on German election uncertainty and caution ahead of Tuesdays US CPI. The prospect of a left-leaning government in Germany to replace Chancellor Merkel is gaining traction and putting pressure on the Euro. Adding further pressure on the Euro is the ECB’s confusing message that it would slow down the pace of its bond-buying scheme but insisting it’s just a recalibrating its tools. Expect Euro to remain under pressure ahead of Tuesdays US CPI data release. Support resets to 1.1710, while resistance lowers to 1.1840.

EURGBP extends its weaker tone after ECB mixed message and uncertainty over the German election. Support resets to .8500 (1.1765) while resistance resets to .8600 (1.1628) if breached look to .8650 (1.1560).

GBP battles to hold above 1.38 as risk-off sentiment continues. The pound remains under pressure amid ongoing high covid case counts and confusion on the governments covid measures. The UK PM will announce the governments next stage of covid measures to tackle rising covid cases into the winter months. Expect GBP to be capped ahead of US CPI on Tuesday, but vs its non-US$ peers GBP has room to strengthen. Support holds at 1.3785 and while resistance resets at 1.3850.