Thursday September 2nd, 2021

The US$ is soft, oil prices supported, equity markets are mixed while US yields dip ahead of Initial Jobless claims and US Factory orders.  The US Initial Jobless Claims will be watched closely after Wednesdays disappointing US ADP payroll numbers which came in 30% below expectations. Initial Jobless claims are expected at 345k, while US Factory orders are expected to fall to 0.3% from June’s 1.5%, any deviation from expectations to increase the US$ volatility. The US$ starts the North American session near a one-month low, a miss in Initial Jobless claims numbers will likely put additional pressure on the US$ ahead of Friday’s key NFP data. In other news, Bond investors are positioning for a pullback in ECB support as the Central bank is expected to hint at tapering at next week’s ECB meeting. Eurozone Producer Prices hits twice its expected 1.1% m/m at 2.3% which was from the higher costs of energy and intermediate goods. Ford cuts its production of the F-150 truck again due to chip shortages. Covid, China is expected to keep curbs on international flights until June 2022 to help control covid cases. Bulgaria imposes new restrictions to curb a surge in covid cases. Face masks are mandated for French school children as they return to school. In currency markets, we are seeing some consolidation ahead of the economic data releases today. CNY is flat while Asian currencies remain mixed with TWD, SGD and IDR up 0.1% while INR is down 0.1%, KRW is slips 0.3% and THB falls 0.5% vs US$. Trading currencies are firm with JPY & NOK are up 0.05%, MXN firms 0.2%, AUD and NZD gain 0.3%, ZAR strengthens 0.5% vs US$. 

Oil prices find support from declining US inventories and a weakening US$ but investors expect gains to be capped by OPEC’s decision to maintain its policy of gradual increases to output. Hurricane Ida impacted about 80% of the Gulf of Mexico’s oil & gas output, but refineries in Louisiana could take weeks to restart. C$ remains within its 1.2550-1.2650 trading range with mixed Canadian economic results, alongside the US$ and oil prices fluctuations. The Canadian elections campaigning continues ahead of Sept 20th election, while intraday CAD International Merchandise Trade will be in focus alongside US Jobs data and US factory orders. Support holds to 1.2548, if breached look for a test of 1.2508 next, while resistance remains at 1.2650.

Euro holds near 1-month highs but fails to capitalize on a weaker US$. Wednesday’s disappointing ADP payrolls keeps pressure on the US$ ahead of Friday’s key NFP data and casting doubts about Fed tapering. In the EU its recent strong economic results have raised expectations that the ECB may looking at tapering options. Markets will likely remain contained ahead of Fridays NFP, but a disappointing US Initial Jobs claims today could see a retest of 1.1900 vs US$. Support remains at 1.1760, while resistance holds at 1.1865, if breached look for 1.1910 next. 

EURGBP edges higher boosted by positive domestic data but remains below the key .8600 resistance level. Support resets to .8426 (1.1868) Feb 2020, if breached look for .8274 (1.2086) Dec 2019, while resistance holds at .8600 (1.1628).

GBP fails to advance through 1.38 despite the US$ being on the back-foot. The same set of Brexit shortages, elevated covid cases and concerns over the NI protocol continue to weigh on the pounds ability to strengthen. If US Initial Jobless claims miss expectations, we will likely see further pressure on the US$. Support holds at 1.3700 and while resistance remains at 1.3815.