Tuesday April 27th, 2021

Equity markets are down, US$, oil prices and US yields are all inching higher as markets await the FOMC. Analysts expects the Fed to keep its status quo on Wednesday, believing that withdrawing monetary support for the US economy is premature. Keeping rates “lower for longer” will keep pressure on the US$ and US yields. President Biden is expected to sign an executive order today to mandate that the minimum wage is raised to US$15 for Federal contractors. On Wednesday the President is set to unveil his individual tax plan, yesterday the Director of National Economic Council said the capital gains tax hike will only hit 0.3% of households. In the currency markets the US$ bounces slightly from its 2-month lows, while CNY is flat and Asian currencies are down 0.1% on average vs the US$. Trading currencies are weaker with NOK lower 0.1%, JPY is down 0.2%, while AUD, MXN, ZAR & NZD are all down 0.3% vs US$. Today US Housing Price Index & Consumer Confidence will be monitored closely after Durable Goods Orders disappointed markets on Monday.  

Oil prices hold steady ahead of OPEC+ meeting today to discuss production policy amid optimist forecasts for energy demand being offset with surging covid cases across India, Brazil, Japan, and other countries. C$ holds near 6-week highs but is off its highs as the US$ rebounds and oil prices stall into the OPEC meeting. C$ will be following the OPEC meeting today and the Fed on Wednesday as both will are primary drivers for the Loonie. Intraday markets will focus on BOC Governors speech. Support holds at 1.2380 with resistance lower at 1.2460. 

Euro weakens below 1.21 as the US$ & US yields strengthen. Markets are marking time ahead of the FOMC on Wednesday as the Fed comments will dictate the US$ direction. Domestically vaccination rates across the Eurozone are growing, Italy and France have loosened restrictions and the EU economy is starting to slowly come back online. Intraday US data releases will provide some direction to markets. Support holds at 1.2035 and resistance at 1.2125.

EURGBP strengthened initially breaching .8700 for the first time in a week and is holding near late Feb levels. Analysts remain bearish Eur looking for a potential move towards 0.83 (1.2048) vs GBP into H2/2021. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP remains volatile but manages to rebound above 1.39 amid covid passport speculation. A covid passport could be in place by late June to allow UK holiday makers to travel across Europe and to the US. Domestically the UK PM troubles continue to grow as several insensitive comments attributed to him continues to make headlines and adds pressure to the pound. Brexit Northern Ireland ongoing issues remain unresolved which is also negative for GBP. Bigger picture the FOMC will be the primary market driver this week for the pound. Support at 1.3850, while resistance holds at 1.3940.