Thursday September 17th, 2020

Currency markets slip after the markets digested yesterday’s US central bank’s policy statement. The FOMC statement said it sees a long road to maximum employment, expect interest rates to remain low until 2023, upgraded its GDP forecast of achieving pre-pandemic levels from 2022 to 2021. The Fed chair said it is congresses responsibility to roll out policies on employment and income inequality. The US President called on Reps to consider a bigger coronavirus relief deal attempting to reignite the stalled stimulus talks. Sino/US tensions continue over TikTok after the US President warned that its parent company DyteDance should not keep control of the US operations. US–China investment flows fall to 9 year-lows as the bilateral tensions increase. US$ index is up 1% MTD vs a basket of major currencies. CNY is off its 16-month highs, down ¼% on Sino/US tensions and the Fed’s comments. AUD, NZD & Asian currencies are also down ¼% on average, while NOK, MXN & ZAR are down ¾% vs US$ on average. Focus shifts to US building permits, Continuing jobless claims and US Stimulus efforts.

Oil prices remain firm as US oil production remains disrupted after hurricane Sally hit the gulf coast and oil producers take stock of the damage. OPEC+ are set to meet today to discuss their agreed output cuts, demand trends and falling oil price concerns. C$ weakened vs US$ despite the +4% rally in oil prices yesterday, weakening from its strongest level in a week (1.3123) after the Fed comments. Bias remains for further C$ weakness with oil prices expected to ease when the US gulf coast oil production resumes. Support at 1.3120, with minor resistance at 1.3210, if breached 1.3270 next.

Euro rebounds from its overnight lows (1.1740) following yesterday’s flight to safe haven US$ after the FEDs comments. Euro hit its lowest level in a month, focus will now shift to the US Congress to see if the Reps / Dems are able to find a compromised in the stalled coronavirus stimulus efforts. European CPI data came out as expected, while Italian global trade balance exceeded expectations. Focus shifts to US data and Dem Nancy Pelosi speech today. Support at 1.1750, with resistance 1.1930, if breached 1.2010 (2020 highs)

GBP drops vs US$ after BoE leaves its interest rate policy unchanged at 0.1% and no change to its quantitative easing program. Speculation is growing that if the UK has a hard Brexit, UK interest rates will likely fall into negative territory. On Brexit, the UK PM is making some concessions giving the House of Commons a “Veto” to override parts of the Brexit treaty in an effort to quell conservative rebels. From the US, Biden warns the UK if he becomes President there will be No trade deal for the UK unless they respect the Northern Ireland peace deal. Brexit and possible negative UK interest rates will likely keep GBP under pressure. Support 1.2850 with resistance at 1.3020.