Thursday October 8th, 2020

Equity & Oil markets firm, while currency markets consolidate as US stimulus hopes builds. Stimulus hopes continue to simmer after the US Presidents tweet saying Congress should pass money for airlines, small business and stimulus cheques for individuals. The Federal Reserve minutes wants more stimulus, but the expectations are that a complete stimulus relief will not happen until after the election. The US$ index bounced off Wednesdays lows and is consolidating at the start of the North American trading session. NZD & Asian currencies on average are up slightly at 0.1% vs US$. Trading currencies MXN, AUD, NOK are up a ¼%, while ZAR is up just 0.1% vs US$. Announced this morning the 2nd Presidential debate will now be held remotely. Intraday focus remains on US stimulus updates and US jobless claims.

Oil prices strengthen on supply concerns related to the Norwegian oil field strikes and Hurricane Delta hitting the US Gulf of Mexico. C$ strengthens alongside oil and the increasing risk on sentiment within the equity markets. Focus shifts to BoC Governor’s speech today which will likely focus on the economy, stimulus requirements and the pandemic’s economic impact on the country. C$ breached 1.3270 support and is on track to retest 1.3170 Sep 21st lows and resistance reverts back to 1.3270, if breached look for a rebound to 1.3340.

Euro firms as markets refocus on US Stimulus hopes and risk-on sentiment improves, but analysts on average remain bearish Euro. Euro’s rally has been driven by a weaker US$ vs EU economic growth. The second wave of the coronavirus is the primary concern for EURO as the virus continues to spread across Europe. Berlin is the latest European capital city to impose fresh lockdown restrictions as daily cases continue to increase. The ECB minutes will be released today, and are expected to highlight economic risk and need for further stimulus to offset the pandemic impact on the EU economies. Support/pivot at 1.1670 with resistance holding at 1.1800, if breached look for 1.1865 next.

GBP rebounds on an upbeat BoE, a weaker US$ and Brexit. BoE Governor commented that he did not expect the 2nd wave of Covid-19 to have the same economic impact on country as it did in the spring. Brexit remains a primary driver for GBP, the negotiations continue without any signs of a deal. Expectations are that Brexit negotiations will be abandoned if no progress is made by Oct 15th when the EU summit begins. GBP remains vulnerable to further volatility. Support 1.2825 with resistance rising to 1.3000.