Tuesday February 9th, 2021

US Stimulus delays, weaker US Treasury yields amid former President Trumps impeachment trial weighs on the US$. US Treasury yields dipped ahead of US Job opening data (dec) adding some selling pressure to the US$. President Biden’s US$1.9T Stimulus appears to be picking up momentum after the White House Press Secretary said the stimulus will probably advance under a procedure that requires only simple majority support in the senate. The impeachment trial of former President Trump begins today, while it has little direct impact on the markets, it does delay the US stimulus process. CNY strengthens 0.15%, while Asian currencies are mixed with both SGD & MYR rallying 0.4% while other Asian currencies are up 0.1% on average vs US$. Trading currencies saw NZD up 0.11%, AUD up 0.25%, NOK up 0.4%, JPY & MXN rally 0.5% and ZAR jumps 0.7% vs US$. No key data out today, focus will be on President Biden/Treasury Secretary comments on US Stimulus.  

Oil prices tests 13-month highs from ongoing output cuts and US stimulus optimism. Libya oil output down 1mio BPD from port strikes, Indonesia’s Pertamina crude oil imports up 50% y/y, while IEA report says India to be the largest source of demand growth to 2040. C$ extends its gains to a near 2-week high on a combination of strengthening oil prices and a weakening US$. Ontario to start to gradually reopen this week but warns of the possibility for “emergency brake” lockdowns. Focus shifts to BoC Lane speech tomorrow, while intraday oil prices will dictate C$ direction. Bias remains to buy US$ on dips. Support holds at 1.2720, if breached look for 1.2681 (Jan27st) with minor resistance at 1.2785 and key resistance at 1.2881 (2021 highs).

Euro strengthens towards 1.21 amid falling US Treasury yields. Eur tests higher primarily driven from a weakening US$ vs a rallying a Euro. Domestically the EU continues to focus on vaccine roll out challenges, while the ECB bias remains for a weaker Euro to help support the EU’s economic recovery. ECB Largard warns stimulus must be removed only “gradually” as concerns grow over the slow covid vaccination rollout. Support at 1.2045 with resistance at 1.2135.

GBP rallies testing almost 2-year highs to 1.3788 vs a weakening US$. The strength is supported by positive BoE comments, a strong vaccination program and the weaker US$ allowed the GBP to extend its recent gains. The UK’s vaccination program as well as its plan to roll out mandatory quarantines by mid Feb will help support GBP, but short term our bias is to sell GBP into this rally as markets are distracted with US stimulus delays. Support rises to 1.3700 key resistance at 1.3792, if breached look for 1.3997 (26th Apr 18).