October 6th Morning Update

The US$ is higher, oil is lower, equity markets lower and US yields are up. Energy surge and inflation worries pushes the US$ index to its highest level in more than a year. In a bid to bring moderates in, Biden conceding smaller price tag for its budget reconciliation package is needed. Debt ceiling, Biden said that Democrats might make an exception to a U.S. Senate rule to allow them to extend the government’s borrowing authority without Republican help. In other news, Biden and Xi agree to abide by Taiwan agreement, referring to a long-standing policy where US officially recognizes Beijing and makes clear that the U.S. decision to establish diplomatic ties with Beijing instead of Taiwan rests upon the expectation that the future of Taiwan will be determined by peaceful means. Military tensions with China are at their worst in more than 40 years. COVID Russia reports record daily death toll. Poland’s daily case up 70% in the past week. US nearing 400M doses of vaccine administered. Singapore reports highest single-day number of case reported. In currency markets, RBNZ lifts cash rate to 0.5%, as expected. RBA kept the policy rate unchanged this week. AUD/USD drops to fresh weekly lows, around 0.7225 region amid sustained USD buying.

Loonie touched its highest since Sept. 7 at 1.2541. Canada posts a trade surplus of C$1.9 billion in August. Nervousness about US inflation and overall market uncertainties have pushed the C$ lower. Support remains at 1.2575, while resistance holds at 1.2670.

German industrial orders fell more than expected in August on weaker demand from abroad. EUR reached a 14-month low as the US$ continue to appreciate across the board. Support resets to 1.1505, while resistance holds at 1.1615.

The EUR/GBP continues to be under pressure as we are testing the lower boundaries. The higher energy prices are directly feeding in the BoE tightening expectation. Support holds at .8500 (1.1765) with next support at 0.8455 (1.1827) while resistance resets to .8600 (1.1628).

The British pound is under pressure as a further surge in energy prices and government bond yields sent investors into safer currencies. The British pound found some support from signs of easing fuel crisis in the UK after the government announced that armed forces will begin delivering petrol across the country. Support holds at 1.3550 and while resistance resets at 1.3640.