Tuesday January 19th, 2021

The US dollar drops as investors prepare for the US Treasury Secretary nominee Janet Yellen confirmation speech. The US Treasury Secretary nominee Yellen is expected to highlight the need for major stimulus and her comments are expected to boost risk-on sentiment. Tensions remain high and investors are cautious ahead of President Elect Biden’s inauguration on Wednesday. Chinese economic growth accelerated to 6.5% in Q4 prompting Chinese investors to pour money into equity markets through fund investments. A Chinese mutual fund attracted a record $37 bln worth of investor subscriptions on its first day of sales.  CNY & Asian currencies rallied 0.2% on average vs US$. Trading currencies were mixed with JPY down 0.3%, while MXN & NZD rally 0.25%, AUD up 0.4%, NOK jumps 0.8% and ZAR leaps 1.4% vs US$. All focus today will be on Treasury Secretary nominee Janet Yellen as she testifies in front of the senate.

Oil prices rebound as investors look beyond the IEA report of slow H1 oil demand related to spike in coronavirus and lockdown measures. PM Trudeau and Albert Premier Kenney scramble to salvage the Keystone XL as President Elect Biden is expected to cancel the pipeline project. C$ strengthened overnight as oil prices gained and US$ eased ahead of Yellen’s Treasury Secretary confirmation speech. C$ remains vulnerable to short term weakness if the Keystone XL pipeline is cancelled. No key Canadian data out today, markets will focus on Treasury Secretary Yellen confirmation hearing speech.  Support 1.2690 as resistance lowers to 1.2785.

Euro strengthens above 1.21 as risk-on sentiment cautiously returns ahead of Yellen speech today. Treasury Secretary nominee Yellen speech is expected to boost risk-on sentiment, weakening US$ and supporting Euro strength. On the data front German ZEW economic sentiment beat expectations, while German CPI met expectations. Investors are expected to remain cautious ahead of Thursday ECB’s Monetary Policy Statement. Intraday focus will remain on Janet Yellen’s speech.  Support rises to 1.2060, while resistance sits at 1.2165. 

GBP rebounds from yesterday’s lows boosted by risk-on sentiment and vaccination news. Janet Yellen’s speech is expected to top the agenda today as she presents to the senate for her nomination. The UK vaccine deployment minister said yesterday that the rollout is going very well, and everyone will be offered the vaccine by September.  The UK is also considering reducing lockdown measures as soon as early March. BoE Haldane will be speaking today but he is not expected to deviate from current policies. Support rises to 1.3560 with resistance forming at 1.3625, if breached key pivot remains at 1.3709 (2021 peak).