Thursday November 25th, 2021

Happy Thanksgiving to our American Friends!

The US$ and oil are lower, while equity markets are higher, and the US yields are unchanged. Yesterday’s FOMC minutes shows its willingness to taper and hike faster if conditions necessitate it. In other news, China’s real estate developer, Kaisa Group Holdings Ltd, who has the most offshore debt among Chinese developers after China Evergrande, missed coupon payments and is looking to extend the maturity of a $400 million bond by a year and a half. Sino-American relationship continues to be strained as the US puts a dozen Chinese companies on its trade blacklist over national security and foreign policy concerns. COVID U.S. military sending medical staff to help Michigan battle COVID-19 surge. Germany’s COVID-19 deaths surpass 100,000 as fourth wave takes hold. In currency markets, Continued pressure expected on the AUD as the Fed seems open to speeding up the tapering and move quickly to raise interest rates while the Reserve Bank of Australia has made every effort to push back expectations for a rate hike.

Canadian trade minister says he is ‘extremely disappointed’ that the US decided to increase duties it is imposing on Canadian softwood lumber. Freeland speaking on inflation said that global forces are responsible for rising inflation, we cannot look for a made-in-Canada solution. Support moves to 1.2615, while resistance level rises to at 1.2735.

EUR/USD regains some composure after yesterday’s sell-off related to the FOMC confirmed hawkish bias. Support moves to 1.1200, while resistance resets to 1.1388. (Note that the Jun2 2020 low is 1.1162 – well within reach given market direction)

BoE’s Bailey is likely to cheer the latest improvement in the UK’s fundamentals to back the hawkish hopes, ECB’s Lagarde may have to accept the downside risks to the bloc’s economy due to the coronavirus, which in turn could weigh on the EUR/GBP prices. Support resets to .8380 (1.1933) while resistance lowers to .8480 (1.1792). 

GBP/USD came under modest bearish pressure during the European trading hours and erased the daily recovery gains to turn flat on the day below 1.3330. BoE Governor Bailey is scheduled to deliver a speech later in the day. BoE’s Tenreyro says she is thinking about rate hike in the medium-term Support drops to 1.3300 while resistance resets to 1.3388.