The US$, oil and equity markets extend their gains on vaccination and stimulus optimism. US President Biden met yesterday with the 10 Republican Senators how presented their US$618Bln stimulus proposal, less than a 1/3rd of the Dems US$1.9T plan. The meeting was described as productive, but the suggestion is that President Biden is not likely to accept the Republicans plan. The markets will focus on President Bidens next step in progressing his stimulus relief plan. The US hits a vaccine roll out milestone with 26.5 million people vaccinated and is averaging 1.34 million people a day being vaccinated. US$ and GBP continue to extend their gains as investors focus on vaccinations efforts to drive a quicker economic rebounds. Australia remains under pressure after its central bank said it will extend its QE program ahead of expectations. AUD & JPY fell 0.15% while other trading currencies fared better with NZD & NOK up 0.1%, ZAR up 0.7%, while MXN rallied up 0.8% vs US$. Asian currencies strengthened with CNY up 0.2%, while Asian currencies are up 0.1% on average vs US$. Focus remains on US stimulus, vaccination rollout and rising concerns of the impact of vaccine variants.
Oil prices strengthen +2% as produces demonstrate that they are reining in output in line with their OPEC commitments. C$ remains under selling pressure and enters its 3rd trading session diverging from the strengthening oil prices. Risk-off sentiment saw investors focus on the Canada’s vaccine strategy and weak domestic performance. Canada’s Manufacturing PMI grew at its slowest pace in 6 months, while the government faces criticism on vaccine supply issues and its overall rollout strategy. Despite the current oil/C$ divergence our bias remains to sell US$ at current levels. Support holds at 1.2750 with resistance at 1.2881 (2021 highs).
Euro continues its downward momentum amid eurozone vaccination concerns. Euro hits 7-week lows as the eurozone struggles with vaccine shortages and ongoing lockdowns pushing the EU towards a double-dip recession in Q1/21. On a positive note, the EU is finding a compromise with AstraZeneca and Pfizer is promising more vaccine jabs. Investors remain cautious over the EU vaccinations efforts; any further delays will likely add further pressure to the Euro. Support lowers to 1.1985 (1.2025 new 2021 low) as lower to resistance 1.2090.
GBP strengthens vs US$ and Euro as investors continue to favour the UK’s faster pace of vaccinations and the scope for a faster economic recovery. An additional support for the pound was the BoE’s pushing back against speculation it may adopt negative interest rates. Despite ongoing headlines around a Scottish independence referendum and potential EU tariffs if the UK government deviates from Eu labour laws, the pound remains resilient. Focus remains on US stimulus updates. Support at 1.3640 with key resistance at 1.3792 (April 2018).