Tuesday December 8th, 2020

Equity, currency & oil markets edge lower, while the US$ holds steady as safe haven buying returns. The clock is ticking for the proposed US$908bln bipartisan pandemic stimulus bill, negotiations continues and a signed bill could be 7-10 days away.  Globally the sharp rise in coronavirus cases approaching 68mio has led to a number of renewed lockdowns including US California, Germany, France and South Korea. The UK starts its mass vaccination, the US and other countries are expected to follow suit in December. Sino/US tensions remain high after the US sanctions 14 Chinese officials and Beijing says it will retaliate. The US$ holds ground as investors return to safe haven buying. CNY and Asian currencies were flat vs the US$. Trading currencies were mixed with JPY & AUD were flat, NZD & MXN are down 0.2%, NOK is down 0.35% while ZAR rallied 0.5% vs US$. Focus remains on US stimulus and US Nonfarm productivity & Unit Labor Costs data for direction.

Oil prices edge lower for a 2nd day as demand concerns rises due to soaring covid-19 cases and lockdowns impacting traditional travel during the holiday season. C$ remains firm, holding below 1.2825 despite an appreciating US$ and easing oil prices. The C$ finding some support as the Canadian economic activity continued to increase for a 6th-straight month. Markets will focus on tomorrow’s BoC rate decision and will also looking for updates from the Government for vaccine approval/roll out strategy. Support 1.2770, while resistance holds 1.2875 if breached look for 1.3010. 

Euro holds steady amid soft EU data, uncertainties over Brexit and ahead of the ECB on Thursday. German & Eur ZEW economic sentiment beat expectations in December on vaccine optimism. German Zew Survey on Economic Sentiment and EUR GDP both dropped below expectations. Wednesday the UK PM & EC president will meet again on Brexit. On Thursday the EU will hold its summit with the focus on tackling the pandemic recovery. The ECB will also be meeting Thursday and they are expected to announce further monetary stimulus. Focus remains on US Stimulus updates and Brexit. Support rises to 1.2050 with resistance holds1.2180 with key resistance holding at 1.2209 (Apr 2018).

GBP bounces off Monday’s low, but remains under pressure as markets hold out for an 11th-hour Brexit deal. The UK PM & EC President failed to overcome key hurdles for a Brexit deal Monday, so the UK PM is heading to Brussels for a last-minute face-to-face meeting on Wednesday. Investors are hoping to see a Brexit compromise on Wednesday ahead of Thursdays EU summit. Expect GBP to remain volatile on Brexit updates. On a positive note, the UK starts its vaccination program today. Support holds at 1.3200, with resistance rising to 1.3400.