Thursday December 3rd, 2020

Safe haven US$ continues under pressure amid US fiscal stimulus hopes and vaccine approval optimism. The US$ drops to multi-year lows as risk on sentiment continues to surge as investors expect the US to approve a vaccine for rollout in 2020. Adding to the risk on sentiment positive progress is being reported that a bipartisan proposal for US$908bln in stimulus is gaining traction. Elsewhere, Sino/US tensions continue as the US impose visa restrictions and Chinese companies seek backup listings as the new US audit law looms. Currency markets are mixed with European currencies strengthening, Asian currencies up slightly and trading currencies stalling.  CNY up 0.16%, KRW rallies 0.8% and TWD up 0.7%, while other Asian currencies are up 0.1% on average. Trading currencies are mixed with ZAR down 0.4%, NOK down 0.3%, MXN, AUD & NZD up 0.05%, JPY up 0.15%. Wednesday’s US ADP jobs report added 307k jobs well short of 410k expected, focus now shifts to US initial Jobless claims today. Alongside jobless claims, ISM Services PMI data, US Stimulus and Vaccine approval updates will provide intraday direction.

Oil prices ease slightly as OPEC+ continue to work on a compromise for an oil output policy into 2021. Saudi wants to maintain the output policy while Russia is seeking a gradual rise in output, markets expect to see a compromise deal reached. C$ holds near Wednesdays high 1.2916, its strongest level since Oct2018. Outside of year end US$ demand, C$ continues to find support from strong oil prices and vaccine optimism. Canadian labor productivity fell a record 10.3% Q3/20, investor focus shifts to Fridays Canadian Job’s data and then BoC rate decision next week. Support lowers to 1.2885, if breached yields potential test of 1.2778 (Oct 1st,18) while resistance lowers to 1.3010.

Euro extends its gains to 32-month highs on the back of a continuing weaker US$. EUR PMI & Retail Sales posted positive gains, but nationally the performance was mixed with German & Italy posting weaker PMI results while Spain & France PMI exceeded expectations. The strengthening Euro will likely be noted at the ECB’s Dec 10th meeting where further monetary easing is expected. Intraday focus will be on the US data and US Stimulus updates for direction. Support rises to 1.2050 with resistance holding at 1.2209 (Apr 2018)

GBP tests a fresh 3-month high on Brexit hopes. The Brexit news pendulum swings to the positive as EU envoys hope for a Brexit trade in days and UK ministers say good progress is being made. If a Brexit deal is achieved, France could still potentially veto the deal if they are not happy with the fisheries agreement. The potential of a vaccine rollout in the UK next week and positive US Stimulus signals will add support to the pound. A Brexit result is coming and the potential for excessive volatility on deal or no deal is likely, if you are concerned, consider hedging now. Support holds at 1.3280, with resistance holding at 1.3500.