Monday September 14th, 2020

Renewed vaccine hopes, risk-on sentiment increases, Sino/US tensions remain and US$ under pressure ahead of the FOMC. Positive news on the vaccine front with AstraZeneca resuming its Phase-3 trials and Pfizer is also gaining traction saying it hopes to provide immunization doses by the end of the year. Yoshihide Suga has been picked by Japan’s governing party to succeed Shinzo Abe as the Japanese PM, JPY strengthens slightly on the news. China launches anti-subsidy probe on certain glycol ethers imports from the US starting today. A wave of M&A deals and vaccine hopes lift equity markets. No key data releases today, but a slew of data releases this week including the FOMC meeting on Wednesday. CNY, ZAR and Asian currencies strengthen about ¼% on average vs US$. NZD & NOK strengthen 0.4% on average, while AUD is flat vs US$ ahead of the RBA minutes released tomorrow. Vaccine updates, Sino/US tensions & US election rhetoric will dictate intraday direction.

Oil prices remain under pressure, starting the week slightly lower as ongoing demand concerns continue to keep pressure on oil prices. Vitol CEO said he expected gasoline and diesel not likely to return to pre-Covid-19 levels until Q4-21. C$ is flat vs US$, despite the US$ index weakening vs a basket of major currencies. Weaker oil prices are likely to keep C$ under pressure today and we could see C$ weaken further vs other major currencies intraday. No key data out for C$, so the focus will remain on oil prices for intraday direction. Support at 1.3120, with minor resistance at 1.3210, if breached 1.3270 next.

Euro edges stronger supported by vaccine hopes, ECB’s comments and ahead of Wednesday’s FOMC meeting. Positive vaccine hopes offset the EU’s rising covi-19 cases and helped boost risk on confidence. The ECB’s comments “We do not target the exchange rate” has given investors’ confidence that the EBC will not attempt any intervention if Euro rallies. Golman Sach’s said Eur/US$ fair value is 1.30 and sited the ECB’s of acceptance of higher rates as a reason to see the single currency strengthen. Support at 1.1800, with resistance remaining at 1.1930.

GBP rebounds from Fridays lows ahead of the UK parliaments debate on the controversial Brexit Bill and amid new UK covid restrictions. The UK parliament will debate the Internal markets bill, the controversial legislation which would reverse the UK agreement on allowing a customs boarder on the Irish Sea. The discussions on the Internal Markets bill which have angered the EU, are expected to last a week. If the UK goes ahead with the proposed bill it could face sanctions from the EU and would likely signal a “no-deal” Brexit. The rising covid cases has triggered the UK government to limit gathering restrictions to 6 people, as well high infection areas are under increased restrictions. Brexit remains the key focus for the UK this week. Support 1.2780 with resistance at 1.2910.