Thursday January 10th, 2021

Despite the shocking scenes of the US Capital building being overrun yesterday, investor reaction was muted, and markets remained stable. The US President concedes, Congress certified President-Elect Biden’s victory and the Dem’s won both the Georgia US Senate seats. Democrats now have control of the US Senate by a slim 51:50 majority. The US$ initial weakened from risk-on sentiment, but markets changed as US Treasury yields rose boosting the US$. The US$ rebound may be temporary as equity & commodity markets extend gains on expectations of further US stimulus. CNY weakens slightly, down 0.05%, while major Asian currencies drop significantly with SGD, MYR & KRW drop 0.6% on average. INR & THB are down 0.35%. Trading currencies also came under pressure with AUD & MXN down 0.8%, NZD down 0.6%, NOK down 0.5%. ZAR continues weaker dropping another 1.3%. Intraday will see a flurry of US data releases including Initial Jobless claims, ISM Services PMI and also the Fed’s Evans speech. 

Oil prices hold steady near their 1-year highs after Saudi Arabia agreed to cut its output by 1mio bpd in Feb & March. C$ weakened in line with its peers overnight from a strengthening US$. With oil & equity markets holding near recent highs and barring any further US political upheavals C$ weakness will likely be temporary. Intraday alongside US$ data releases, Canadian Ivey PMI and Intl Merchandise trade may provide some additional direction to C$. Support holds 1.2628 if breached 1.2522 (Apr2018) resistance at 1.2735.

Euro weakens amid a stronger US$ supported by rising US yields. Risk-on sentiment remains in place despite yesterday’s disturbing scenes in the US capital. EU leaders are under pressure to accelerate the pace of vaccinations as the EMA approves the moderna vaccination. Equity and commodity markets remain positive, but analysts continue to forecast EUR to 1.21 by the end of Q1/21. Intraday focus will remain on coronavirus updates and US data releases. Support drops to 1.2210 with resistance lower at 1.2340.

GBP comes under pressure amid surging coronavirus cases, national lockdowns and speculation of negative UK Interest rates. Speculation that the BoE may use UK negative rates to counter the economic hit from the 3rd virus lockdown swirled around the markets today. UK PM vows to slash business rules to help businesses recover in a post-Brexit/national lockdown environment. Support 1.3515, with resistance at 1.3690, if breached look for 1.3773 (May2018).