Thursday September 24th, 2020

Risk off sentiment continues as global economic concerns drives US$ to multi-month highs. The Fed Vice Chair and the Cleveland Fed Bank President both stated that the US economy remains in a “deep hole” and renews calls for more fiscal stimulus. In Washington the political deadlock continues, and the prospect of a federal virus relief stimulus remains doubtful. The primary concerns for markets are the surge of coronavirus cases, fresh lockdowns measures and the longer-term implications to the economy. Safe haven buying continues with US$ index up 2.5% in September, currently sitting near 2-month highs. Global economic concerns saw CNY come under fresh selling pressure down ¼% vs US$, while Asian currencies are down 0.2% on average vs US$. AUD & NZD are down 0.4%, NOK and ZAR are down 0.7%, while the outlier MXN strengthened 0.2% vs US$. Intraday more Fed Chair testimony, as well Treasury Sec Mnuchin speaks, US initial Jobless claims and New Home Sales.

Oil prices remain under pressure in anticipation of falling oil demand related increasing coronavirus travel restrictions and a strengthening US$. C$ slipped to its weakest level since Aug 4th on weaker oil prices and the prospect of further US economic weakness. PM Trudeau promised major new investment and policy initiatives, stating “this is not the time for austerity”. Bias remains buy US$ on dips. Support at 1.3300 with resistance at 1.3420, if breached look for 1.3537 (Jul21st)

Euro remains under selling pressure testing 2-month lows vs US$. Disappointing German IFO data highlighting growth concerns coupled with safe haven US$ demand caused Euro to breach support levels. Increasing covid related restrictions, weaking EU economic data, ECB exchange rate concerns and risk aversion will likely keep Euro under pressure. Focus will shift to the US testimonies and jobs data for intraday direction. Support drops to 1.1580 with minor resistance at 1.1670, followed by 1.1785.

GBP bounced off overnight lows, strengthening slightly after the UK chancellors new “Pay as you grow” scheme. The UK government unveil new job protections plans to replace the existing furlough scheme with “pay as you grow”. Effectively the scheme extends loan deadlines, provides new job support scheme starting in November and will continue to pay part of worker’s wages. BoE Governor is set to speak today, and markets will focus on the direction of interest rates and UK economic outlook. Brexit remains the critical focal point for markets short term and will watch for any comments from the ongoing EU/UK negotiations. Support remains at 1.2675 with resistance at 1.2800.