Thursday September 10th, 2020

The US$ weakens ahead of the ECB rate decision, on US election rhetoric and ahead of US data out this morning. A primary focus of the markets will be the ECB rate decision out at 7.45 EST, as well as possible comments from the ECB president on concerns over a strengthen Euro. The US president acknowledge he downplayed the severity of the coronavirus after his Dem rival ceased on comments from a book to be published this month. The US initial jobless claims will be watched closely with the economic recovery being a strong theme in the US elections. The US$ index is down vs a basket of major currencies, JPY and CNY are flat vs US$ as they await the ECB rate decision. Zar again the biggest outlier is down almost 1% on weak domestic economic data. AUD, NOK, NZD and MXN are up 0.2% on average vs US$. Focus remains on US election polls/rhetoric, the ECB’s rate decision, US PPI and US Initial Jobless Claims for direction today.

Oil prices slip as demand concerns continue. Fears of falling demand is prompting major oil companies to start booking floating storage tankers to hold the potential excess oil. Wednesday, BoC kept rates on hold yesterday and warned of a slow and choppy recovery ahead. C$ is holding steady this morning after rebounding from a 3-week low yesterday, but weaker oil prices will likely put pressure on the Loonie again today. Other factors to watch will be the ECB, BoC, US PPI and US initial Jobless claims which will likely impact US$ direction. The BoC Governor is set to speak today, and Cad markets will look to see if Governor Macklem expands on yesterday’s comments. Support at 1.3120, with resistance at 1.3185, if breached 1.3270 next.

Euro edges slightly stronger ahead of the ECB rate decision, where the ECB could possibly indicate more policy easing. The ECB President will present new economic forecasts for the EU, with reports that the ECB will express optimism about the EU recovery. The ECB President Legarde will likely be asked about the exchange rate after the Chief Economist said he is “Watching it”. Still weighing on Euro is the rising number of covid-19 cases, Brexit and the safe-haven US$.  Support at 1.1745, with resistance at 1.1850, if breached 1.1930.

GBP bounces off Wednesday’s lows on a weaker US$ and readies itself for an emergency Brexit meeting today. The publication of a British bill that violates the Withdrawal Agreement has prompted an emergency Brexit meeting to discuss the proposed bill. The bill has created a loss of trust of the UK government in the EU, with the potential that Brexit talks could potentially collapse altogether. If the EU abandons the Brexit negotiation tables, GBP come under strong selling pressure. Support 1.2910, if breached 1.2780 next with resistance at 1.3050.