Thursday September 3rd, 2020

Worried central bankers, vaccine hopes, falling oil prices and a firmer US$. The sharp fall in the US$ value in August raised concerns from some central banks, including the ECB and China’s PBOC watching a weakening US$ which could impact their exports, lower prices and possibly increase the need for more domestic stimulus. A speech by ECB board member Schnabel today will be watched closely for any comments on the Euro. In the US the CDC has asked states to speed approvals so coronavirus vaccine will be ready by Nov 1st for distribution. Trade related currencies came under selling pressure with AUD, NZD, & NOK down over 0.6%, while ZAR & CNY are flat, and Asian currencies are down 0.2% on average vs US$. US employment remains the prime focus to investors, the Initial jobless claims will be watched closely after yesterday’s disappointing ADP Employment change. Alongside the Jobless data, ISM Service PMI as a flurry of other US data releases which will provide intraday direction to US$.

Oil prices slip to 1-month lows as US gasoline demand falls, the reduction in Chinese crude requirements and speculation Iraq was seeking exemption from OPEC oil cuts. China’s splurge in oil purchases (May-Aug) is expected to drop by up to 2mio bpd, which will likely impact oil prices. C$ weakens as oil prices come under pressure falling 4% so far in September. No key Canadian data out today, US$ and oil prices will dictate intraday direction. Support building at 1.3030 with initial resistance at 1.3120 (minor) and then 1.3185. 

Euro continues to edge weaker on ECB concerns and disappointing PMI data for France, Italy and Spain. The FT article which indicated the ECB’s concerns over the rapid appreciation in the Euro’s value vs the US$, quoting ECB chief economist, saying he was “following” exchange rates. The article prompted investors to unwind speculative long positions for fear of possible ECB action. Today’s PMI data showed a divergence the EU’s ability to rebound from the virus lockdowns. Spain, Italy and France fell short of expectations, while Germany managed to slightly exceed expectations. The main focus of the markets will be tomorrows US Non-Farm Payroll, providing incite to the US economic recovery and will likely drive US$ direction. A break of 1.1780, opens a move to 1.1725, with resistance lowering to 1.1850.

GBP continues to tumble as US$ strength returns, and investors refocus on Brexit and the UK’s domestic woes. UK service PM for August dropped below expectations and below July levels. The UK economy remains weak and is still recovering from the 20% drop in GBP for Q2 2020, the worst performance of its industrial peers. The Chancellor of the Exchequer according to the paper said, “Difficult things to come” and promised “no horror show of tax rises”. Fears for the next steps for the furlough scheme, which is set to expire next month, any deviation could see a rise in unemployment. Brexit talks remains deadlocked with the prospect of a “no-deal” Brexit growing. Support lowers 1.3180 with resistance now at 1.3300.