Thursday August 26th, 2021

The US$ is steady, oil prices dip, equity markets are down, while US yields are mixed ahead of the start of the Jackson Hole Symposium. Analysis lowered their expectations for Fed Chairs Friday speech, adopting a neutral stance due to a rise in the Delta variant across the US. Analysis expect the Fed will want more information on how the Delta variant is impacting the economy before it announces tapering timelines. On the Economic front, US Initial Jobless claims are expected to stall w/w, as well US GDP is expected to rise 6.7% vs previous 6.5%. The US$ is steady to start the N.American session, but the dollar has the potential for increased volatility if the US data results miss/surpass expectations. In other news, South Korea becomes the first Asian country to rise its interest rates. German consumer moral drops due to accelerating inflation and rising covid cases. The Oil rally ends amid covid concerns and returning oil supply. Covid, Japan suspends 1.6 million doses of Moderna vaccines after contamination reports. The British public view of the governments management of the covid crises turns negative for the first time since Feb as worries grow over a new wave of infections. Vietnam worries that that there could be 50k new cases in a key manufacturing hub. In currency markets, KRW weakened vs US$ despite its central bank raising interest rates. Asian currencies come under fresh selling pressure down 0.2% on average and CNY dips 0.15% vs US$. Trading currencies are mixed with JPY down 0.1%, AUD & NZD weaker 0.15%, MXN falls 0.45% while NOK is up 0.05%, ZAR strengthens 0.3% vs US$. All eyes will be on US data results today for intraday direction.

Oil prices dip as the 3-day rally stalls amid increasing covid concerns and the Mexican oil supply coming back online. US crude inventories continued to fall for a 3rd week which is providing some support to oil prices, but overall analysis remain bearish for oil prices for the remainder of 2021. C$ stalls near its recent highs as markets wait for Friday’s Fed speech. Intraday with no Canadian data releases, markets will focus on US data and oil prices to provide intraday direction. Our bias remains to buy US$ on dips as the potential of weaker oil prices will put pressure on the loonie. Support holds at 1.2575, if breached look for 1.2508 next, while resistance holds 1.2680, if breached look for 1.2810.

Euro breached 1.1750 as Fed taper expectations ease. Markets remain cautious ahead of Fridays Fed Chairs speech, but as analysis turn neutral on tapering it has allowed Euro to extend its short-term gains. Intraday a miss in expectations for US GDP or US Job’s data has the potential to see an increase in US$ volatility. The ECB released its minutes which saw an upgrade to its economic forecasts helping support the EUR, but downbeat German consumer and business climate offset the positive news. Support holds at 1.1660 next, while resistance resets to 1.1810.

EURGBP gains on the upgraded ECB economic forecast, but markets will remain cautious until after the Fed Chairs comments tomorrow. Support resets to .8426 (1.1868) Feb 2020, if breached look for .8274 (1.2086) Dec 2019, while resistance holds at .8600 (1.1628).

GBP dips below 1.3750 as food shortage warnings caused investor concerns. UK supermarkets warned of possible food shortages over Christmas due to a shortage of non-UK workers post Brexit. Adding further pressure to the pound is the increasing covid cases across UK, raising concerns possible new restrictions. Intraday US data and Jackson Hole will provide intraday direction. Support at 1.3630 and resistance resets to 1.3780.