Thursday January 21st, 2021

Global equity markets rally while US$ safe haven weakens as risk-on sentiment prevails. Investor confidence is growing from US stimulus optimism and the expansion of vaccination strategies. Markets remain confident that President Biden will deliver on his US$1.9T pandemic relief stimulus. Global covid deaths surpass 2mio with many countries recording record daily-virus deaths focusing the need for the expansion of vaccine rollouts. President Biden signed 15 executive orders yesterday and today he signs 10 new orders and directives to increase his administrations national strategy to fight the covid-19 pandemic. Global central banks amid vaccination rollouts saw BOJ, BOC and ECB keeping their interest rates and asset purchasing policies unchanged. Currency markets are stronger with CNY up 0.1%, while Asian currencies are up 0.2% on average vs US$. Trading currencies also extended gains with MXN up 0.05%, JPY up 0.15%, AUD up 0.35%, ZAR and NZD up 0.65%, while NOK rallied 0.75% vs US$. This morning we will see a flurry of US data releases which will be watched closely for intraday direction.

Oil prices dip after the API weekly crude oil stock showed a surprising buildup in inventories, reigniting some pandemic-led demand concerns. Oil prices are supported by Saudi Arabia’s cut in output for Feb & March and optimism for the US$1.9T US stimulus. C$ opens near new 3-year highs after testing 1.2605 as BoC kept rates on hold, oil prices remain firm and a weaker US$. BoC delivered an optimistic message on economy as it looked beyond the economies weak 2021 start and anticipates a strong economic rebound after lockdowns. President Biden cancelled the Keystone XL permit and as a result TC Energy halts the project. Focus will shift to US data releases and oil prices for direction. Support drops 1.2605, with potential of extending to 1.2522 (Apr17th,18) with resistance at 1.2698.

Euro holds above 1.21 ahead of the ECB rate decision. The ECB is expected to keep status quo on interest rates and its bond purchases. Investors will focus on the ECB Presidents comments and if she will attempt to talk down the Euro in current economic conditions. The EU is facing the risk of recession as the pandemic keeps Europe in lockdown. In Italy political tensions continue and other EU countries are also facing increasing political tensions. Support holds at 1.2065 with while resistance at 1.2178.

GBP extends its gains to new multi-year high amid rising risk-on sentiment. The UK’s vaccine rollout strategy alongside US stimulus optimism is helping GBP become a currency of choice for investors. Eur/GBP slides to new 8-month lows as investors switch out of Euro into GBP primarily driven on the divergence of the vaccine rollouts. Focus will shift to US data releases including Philly Fed Manufacturing index, Initial Weekly Jobless Claims, Building Permits and Housing Starts. Support rises to 1.3650 with resistance extending to 1.3792 (April 2018).