Thursday February 11th, 2021

The US$ consolidates after Wednesdays soft US inflation data and the Fed Chairs dovish comments. The Fed Chair said that the US should strive to reach full employment, adding that the bank will not automatically tighten policy solely on improvement in the job market. Overall Fed Chair Powell signaled his support to the economy, and expects to see bond yields and US$ to remain depressed. The impeachment trial of former President Trump is delaying progress of President Biden’s US$1.9T stimulus bill.  President Biden had his first call with the Chinese Premier, on the call he raised concerns on unfair economic practices, HK political freedom & human rights. Quiet Asian markets with the Lunar New Year holidays, CNY dropped 0.05%, while Asian currencies were down 0.1% vs US$. Trading currencies saw JPY down 0.15%, while NOK & NZD up 0.2%, AUD up 0.35%, MXN up 0.5% and ZAR rallies 0.82%. Focus shifts to US Initial Jobless claims after the Fed Chairs comments yesterday for intraday.

Oil prices retraces 0.6% from recent highs as renewed lockdowns and the emergence of new variants started to weigh on the prospects for a swift demand recovery. The IEA commented that global oil supply is still outstripping current demand but did see demand building into summer. C$ opens near 3-week highs primarily on strong oil prices, while ignoring vaccine shortages and record deficits across the provinces. The Province of Ontario said it will increase spending on hospitals and small business during the pandemic and is forecasting a record budget deficit in 2021. Short term our bias is to buy US$ on this dip weaker oil prices expectations. Support at 1.2667 (Jan22nd) with minor resistance at 1.2745.

Eur holds steady over 1.21 as the US$ stalls near two-week lows. The US Senates focus on the impeachment trial, is leaving the US 1.9T stimulus sidelined. Euro remains vulnerable to further weakness as vaccine delays, extended lockdowns and sluggish economic forecasts will continue to overshadow Euro strengthen. Bias remains to sell Euro on rallies. Support at 1.2045 with resistance at 1.2135, if breached look for a test of 1.2190. Eur/GBP strengthened 0.15% to .8770 as GBP consolidates, but our bias remains to see a retest Fridays lows of .8736. 

GBP retraces slightly from its near 3-year high. GBP consolidates below recent highs, but markets remain overall bullish GBP based on the UK’s aggressive vaccination campaign. The UK vaccination campaign has reached almost 20% of the population, the highest level against its peers. The UK is feeling the pain of post Brexit, as Brussel doesn’t overturn its ban on part of the UK shellfish exports. The UK PM is asking for patience as pressure is on the PM to open the UK economy. Focus shifts to the UK GDP, manufacturing and industrial production data out on Friday. Support rises to 1.3785, with resistance at 1.3865 (2021 high), if breached look for 1.3997 (26th Apr 18).