Thursday February 4th, 2021

US$ extends its gains to 2-month highs supported by rising US treasury yields, US stimulus optimism and improving US data. A poll shows 70% of Americans support President Biden’s US$ 1.9T covid relief plan. The President vow’s no retreat on $1,400 checks and the Dems are pushing to fast track the stimulus vote. Fed Bullard commented that US economy is recovering faster from the COVID-19 slump vs previous downturns, and the unemployment rate may continue to fall rapidly. Bullard also played down wild equity markets concerns and reiterated Fed Powell’s comment that the Fed is in no hurry to taper its asset purchases programs. CNY weakens slightly down 0.05%, while Asian currencies weaken about 0.2% on average vs US$. Trading currencies weaken vs US$ with AUD down 0.05%, JPY down 0.25%, NZD down 0.42%, NOK & MXN down 0.55% and ZAR falls 0.8%. Intraday US stimulus updates, US Jobless Claims and US Factory Orders will help provide market direction today.

Oil prices continue advance on US stimulus optimism, adherence to OPEC output cuts and expanding global vaccination programs. Brent crude is up +0.5%, approaching US$59PB and hitting its highest levels since Feb21st, 2020. C$ holds within its current range as it continues to balance between a strengthening US$ vs higher oil prices. Focus will be on Friday’s Canada’s Unemployment data which may help guide BoC action, as well Ivey PMI data. Today our bias short-term remains to sell US$ on any rally toward mid 1.28’s with high oil prices likely capping C$ weakness. Support holds at 1.2750 with resistance at 1.2881 (2021 highs).

Euro weakness continues as the single currency slips below the psychological 1.2 level vs US$. Euro slipped to fresh 2-month lows favoring the US$ for its higher yields, its accelerated vaccine program, anticipate of fresh stimulus and optimism for its economy to rebound quicker. Euro may find support as the EU secures increased AstraZeneca’s doses as well as the potential of stability for Italian politics as former ECB President Draghi is asked to form a new government. Expect Euro to remain under short-term pressure vs US$ and GBP. Support holds at 1.1985 if breached expect 1.1925 (low Dec,2020) resistance lowers to 1.2049.

GBP jumps almost ½% this morning from a 2 ½ week low after the BoE comments. The BoE keeps interest rates and asset purchases unchanged, saying the committee until there is clear evidence of economic rebound and achieving 2% inflation target. BoE commented that a possible emergence of vaccine-resistant virus variants could trigger a renewed rise in infections. The UK government commented today that covid cases have passed their peak and highlighted that 15% of the population have already received their first dose of vaccine. Focus switches to the US data and US stimulus updates for direction. Support at 1.3585 with resistance at 1.3700 and key resistance at 1.3792 (April 2018).