Thursday November 12th, 2020

The US$ steadies as US election uncertainty continues and vaccine enthusiasm ebbs. President Elect Biden focuses on the transition & COVID-19, as the White house initiates legal challenges to the election results. Markets refocus on the coronavirus as global virus deaths hit records +1.28mio, global virus cases top 52 mio as virus lockdowns expand. In other news, China is close to a huge free-trade deal which could be signed this weekend. The Regional Comprehensive Economic Partnership (RCEP) is made up of 15 countries across Asia, Japan & Australia and its noted that India and the US are not included in the partnership. CNY and Asian currencies are up 0.15% on average vs US$, while JPY is up 0.2%. Trading currencies are stable with NOK & NZD flat, while AUD, ZAR & MXN are down 0.1% vs US$. The volatility index drops back to 3-month lows, while the US$ index is down 1.25% MTD vs a basket of major currencies. Markets will watch the US CPI and Initial Jobless claims data this morning. A key focus will be the ECB panel with the Fed Chair, ECB President and BoE Governor. 

Crude prices hold steady today with the WTI up +17% month-to-date, supported by vaccine optimism and expectations OPEC will extend its production cuts. Offsetting the vaccine rally are comments from the IEA that demand is unlikely to get a vaccine boost until later in 2021. C$ has somewhat broken away from the oil correlation and is recalibrating after failing to extend its rally on Monday. With no key economic data out for Cad this week, rising domestic virus cases and conversative IEA comments we could see further C$ weakness. Support rises to 1.3030, with resistance at 1.3120.

Euro rebounds on a weaker US$ and expectations of increasing EBC stimulus. The ECB discussion panel will be watched closely for indications of virus impact, economic growth and stimulus direction. The coronavirus surge across Europe remains the primary focus as the realization that the vaccine will not be providing any relief until possibly Q2-2021. Any significant strength in euro over 1.2 will likely cause concerns to the ECB. US Data – Election Updates and the ECB panel will be watched closely today. Support at 1.1710 with resistance rebuilding at 1.1880.

GBP comes under pressure as UK GDP missed expectations with 15.5% QoQ in Q3. The UK economy is growing at a slower than expected rate and is lagging its peers due to the coronavirus and its latest round of lockdowns. The BoE governor said there was still a “huge gap” in the economy, but the vaccine news is encouraging. The UK summons the Chinese ambassador to register deep concerns over the Hong Kong legislators. The Hong Kong Legislators situation could have an impact on the Sino/UK relationship at a time when the UK is looking to build its trading partners for post-Brexit. Brexit negotiations continue in the background and remains the primary driver for GBP direction. Support rises to 1.3140 with resistance lowering to 1.3280, if breached look for possible extension to 1.3482 (Sep1st).