Thursday May 13th, 2021

The US$ holds firm, oil prices fall, equity markets are down, while US yields are steady as risk-off sentiment resurfaces. The US$ holds on to its gains after Wednesday’s US CPI data posted its largest gain in 12-years as inflation accelerated to 4.2% y/y. The fear of rising inflation saw global equity markets slide to 6-week lows, US yields hold steady, oil prices retreated, while currency markets gave up recent gains. Market focus shifts to today’s US PPI and Initial Jobless Claims today after Friday’s NFP & Wednesday’s CPI both delivered results outside of expectations. Wednesday’s WH President Biden/GOP meeting saw Republicans rule out tax rises, but a bipartisan compromise is still possible on infrastructure spending. In currency markets AUD & NZD touched 1-week lows, ZAR stabilizes after hitting 16-month highs on Tuesday & China’s yuan bulls pause for thought after the US inflation spike. CNY holds flat, while Asian currencies are down 0.15% on average vs US$. Trading currencies are mixed with JPY up 0.05%, while MXN is down 0.15%, NZD & ZAR dip 0.3%, AUD falls 0.4% & NOK tumbles 0.8% as oil prices ease. Focus will be on US PPI & US Initial Jobless Claims for intraday direction.

Oil prices tumble over 2% as Colonial Pipeline starts to come back online, and markets refocus on surging covid cases across India. Oil prices fell from their 8-week highs, but with oil demand outstripping supply, analysts expect oil price weakness to be limited. C$ eased from its 6-year high (1.2042) from a combination of easing oil prices and a strengthening US$ from Wednesdays US CPI data. The BoC Governor Macklen is due to speak today with markets focused on any comments related to recent C$ strengthening and interest direction. Momentum remains with C$, only a break of 1.2250 will put a break on C$ bullish tone. Support (Key pivot) at 1.2085 with resistance rising to 1.2190.

Eur slips below 1.2100 as the US$ rebounds on Wednesday’s inflation data. Risk-off sentiment returns after the US posted its highest CPI number in 12 years. Mounting US inflation fears, and the prospect of interest rate changes put pressure on Euro. Overall Euro is exiting the 3rd wave lockdowns, the vaccination campaigns remain positive and going forward look for opportunity to buy Euro on dips. Intraday markets will be focused on US data releases again. Support reforms 1.2050 and resistance at 1.2200.

EURGBP rebounds as Brexit jitters remain over Northern Ireland and the possibility of stalled entry of the UK Financial services within the EU. Analysts remain bearish Eur looking for a potential move towards 0.83 (1.2048) vs GBP into H2/2021. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP drops +100bps amid risk-off-US$ buying and Brexit jitters. Wednesday’s surprised US CPI data results fueled speculation the Fed will raise rates sooner rather than later stalled risk sentiment. The resilience of the UK will continue to provide core support for the pound as the UK continues to rebound post Brexit and 3rd wave lockdowns. Bias to buy GBP on dips as the likelihood of a Fed change is premature when it’s balanced against Friday’s disappointing NFP results. Support lowers 1.3985, while resistance resets to 1.4100.