Equity, oil & commodity prices weaker, US yields stable and the US$ index strengthens. Markets prepare for a potentially volatile day with the Fed Chairs speech, OPEC+ meeting, US Stimulus updates and the US Initial Jobless claims data release. The main driver of the US$ strength has been the rise in US treasury yields after the Fed Chairs comments that yields are reflecting upbeat growth prospects. Markets will be focusing on the Fed Chairs comments today to see if he will repeat his previous comments or raise concerns about rising US yields. In Washington, President Biden agrees to compromises to the US$1.9T stimulus relief plan in an effort secure support and pass the Senate in a weekend vote. OPEC+ meets and markets wait to see if output will remain on hold in April or raised. 8.30am US initial jobless claims release which are expected see an increase in initial claims to 750k vs 730k pervious. CNY holds flat while Asian currencies are mixed, but are flat on average vs US$. Trading currencies are mixed with JPY & NOK down 0.35%, AUD & NZD are flat, while ZAR strengthens 0.2% and MXN rallies 0.4% vs US$. US data releases, Fed Chair & OPEC decision will provide intraday direction to the markets.
Oil prices fall 1% ahead of the OPEC+ meeting with expectations that March output cuts will extend into April but are unsure if Saudi Arabia will end its voluntary 1 million BPD production cuts. Wednesday EIA US crude inventories surged, but gasoline stocks fell the most in 30 years due to the extreme US weather conditions. C$ fell from Wednesday’s highs ahead of the OPEC meeting. Overall C$ has benefited from higher commodity prices on anticipation of an economic recovery as global vaccination campaigns ramp up. No key Canadian data out today, so focus will remain on the Fed Chairs speech and the OPEC output decision. Support at 1.2600 with resistance at 1.2685.
Euro trades within a narrow range ahead of flurry of US events and elevated US yields. The US$ index rebounds from its multi-month lows as US yields hold firm on the Fed Chairs acceptance of higher yields. Markets will focus on the Fed Chairs comments today to see if his tone shifts following Fed Brainard comments that US yields “caught her eye”. Domestically Germany is set to ease some restrictions on Monday while extending other measures until late March. Vaccination efforts across the EU are progressing but remain behind the UK and US rollouts. Eur direction will continue to be driven by US yields / US$ strength. Support holds at 1.2000 with Resistance dropping to 1.2120. EURGBP extends its weakness down a further 0.15%, and down 0.45% MTD ahead of Fed Chairs comments. Bias remains for further short-term weakness in EUR/GBP as the vaccination & economic rebound story continues to favour GBP. Support holds 8600, with resistance at 8735.
GBP holds near 1.3950 as markets focus on US yields and the Fed Chairs comments. The UK FTSE drops 1% today as UK yields strengthen after the UK chancellors announced increases in taxes to their highest levels since the 1960’s. The Chancellor went on to say Wednesday that he expected the UK economy will hit pre-pandemic size by mid-2022, 6-months early than previously forecasted. GBP remains supported from the UK’s rapid rollout of vaccines approaching 1/3rd of the UK’s population. Support holds at 1.3920 while resistance at 1.4015.