Thursday June 4th, 2020

Global markets appeared to be taking a breather from their 3-day rally with equity and currencies starting the day weaker. The scale of the recent gains is seeing investors taking some profits, as markets take stock of current US tensions, the ECB and US Jobless claims. Chinese CNY weakened as tensions rise over Washington’s plan to designates more Chinese media outlets as foreign embassies and barring Chinese passenger carriers from flying to the US. US$ index rebounded slightly vs a basket of global currencies as “risk-on” sentiment cools slightly. This morning ECB rate decision, US Initial jobless claims, US Trade Balances will provide intraday direction.

OPEC+ failed to agree to hold their anticipated meeting today, causing oil prices to stall as concerns grow over the ability of crude produces to agree to an extension on output cuts. Yesterday the BoC held rates unchanged as expected. C$ touched a 3-month high but was unable to breach the key 1.3460 level, as oil prices eased. This morning focus will be on Cad International Merchandise Trade and US data for direction. 1.3460 (March 9th low) remains a key support, a breach opens a potential 1.3200 (Feb21st lows) with resistance at 1.3585. 

Euro is consolidating around the 1.1200 level vs US$ ahead of the ECB rate decision and the direction of further EU stimulus measure. The ECB said the German court lacks jurisdiction over its policy decisions and the ECB is expected to enlarge its PEPP bond-buying scheme. The ECB’s decision will be the primary driver for Euro today. Resistance remains at 1.1240 a break opens the potential to 1.1490 (March 9th highs) vs US$ next with support at 1.1050.

GBP remains firm despite flip-flopping reports on positive / negative Brexit news. The BoE sent the message to commercial banks to be prepared for a no-trade-deal Brexit. Anticipation of mutual concessions and possible intervention by the UK PM appears to be now out of the question.  The current round of negotiations ends Friday without any positive outcome and expectations are that the PM will not ask for an extension at June30th deadline. GBP remains vulnerable to further weakness on a no deal Brexit. Resistance has lowered to 1.2585, with support at 1.2470 if breached GBP could gap lower towards 1.2320 (Jun1st low).