Thursday July 2nd, 2020

Vaccine, face masks and falling US unemployment hopes have all helped to boost a fresh risk-on sentiment. Pfizer and BioNTech have both reported promising results in recent first trial COVID-19 vaccines and are ready for mass production if they are successful. The US President appears to have endorsed wearing face masks, saying he would do it and he does it. Goldman Sachs estimated that wearing a mask could reduce lockdown restrictions and boost GDP by as much as 5%. The US Non-Farm Payroll is widely expected to report 3mio new jobs, reducing the US unemployment rate to 12.3%. Markets responded positively overnight with equity and oil markets stronger amid US$ safe haven selling. Rising corona virus cases and Sino/US tensions remain key concerns, but intraday US data results will dictate short term direction. 

Oil prices continue edge higher supported by a fall in US crude stockpiles and comments by the Russian energy minister saying oil markets may have balanced out supply and demand in July. C$ is holding steady after Tuesday’s significant rally, finding support from a weaker US$ and rising oil prices. Alongside the US data releases, watch the Cad International Merchandise Trade (May) and Markit Manufacturing PMI (June) released this morning. Support rises to 1.3540 with resistance holding at 1.3635.

Euro extends its gains and retests 1.13 level vs US$ amid optimism for strong US jobs growth US and vaccine hopes. The Eurozone unemployment rate rose less than expected helping boost Euro. German retails sales surged providing optimism that the downturn was less severe than expected and the German parliament backs ECB’s bond-buying program. US Data will direct intraday direction. Support rises to 1.1215 and resistance extends to 1.1350.

GBP strengthens on a weaker US$ and positive risk on sentiment, shrugging of Brexit and Covid-19 concerns. Positive signals on vaccine testing and anticipation of strong jobs data out of the US saw investors aggressively buying GBP and testing the psychological 1.2500 level. Bigger picture the ongoing Brexit talks, fears of rising 2nd wave in the UK and limited support for the PM’s back to work initiatives – our bias is to sell GBP on the rally. Support rises to 1.2350 with resistance at 1.2585 (Jun17 high).