October 7th Morning Update

The US$ is lower, oil is lower, equity markets higher and US yields are unchanged. Senate appears close to a deal on short-term debt limit extension that would push back the problem until December. With the recent oil price surge, Americans are now paying the most for gas in seven years. US considers selling from its strategic oil reserve news of which had an immediate impact on oil prices. In other news, a Biden, Xi plan U.S.-China virtual summit is being considered before year-end. Putin offers to ease Europe’s natural gas crisis conditional on pipeline approval. With North Korea facing the risk of starvation, the UN are calling for sanctions to be eased. COVID Biden administration announces $1B investment in at-home test. Finland, Sweden, Denmark pause Moderna vaccine for younger age groups. Sydney to exit lockdown next week after vaccination rate hits 70%. In currency markets, Taiwan looking for international support after Chinese incursion. Asian gasoil prices hit multi-year highs. Recent surge in natural gas prices underpins the AUD comeback.

Retreating oil prices could undermine the Loonie and help limit gains for the C$. According to a Reuters poll, C$ upside seen shrinking if global economic recovery slows. Market will focus on US jobless claims, CAD’s Ivey purchasing manager index and BoC’s Macklem speech today. Support remains at 1.2575, while resistance holds at 1.2670.

ECB’S Galhau (Bank of France) believes inflation will come back down below 2% within a year. ECB’S Stournaras (Bank of Greece) added that there is no need to modify monetary policy for now and that the market view on rate does not reflect ECB’s guidance. German Social Democrats upbeat about three-way coalition talks. German industrial production slumps on supply chain disruption. Support remains at 1.1505, while resistance holds at 1.1615.

Surging energy prices and their impact on the Eurozone’s growth prospects have been weighing on the euro. Support holds at .8500 (1.1765) with next support at 0.8455 (1.1827) while resistance resets to .8600 (1.1628).

BOE’s Pill expects interest rates to remain at relatively low levels for the coming years. Britain’s National Grid says it can meet winter gas demand. Support holds at 1.3550 and while resistance resets at 1.3640.