Tuesday January 5th, 2021

US politics continue to cause market jitters amid the Georgia elections and the Congress certification of the Biden presidency on Wednesday. The US Senate run-off election in Georgia is critical for Dems, if they lose it will be the first time since 1989 that a President starts their term under a divided government. The US President continues his campaign to overturn the election results. Markets will await Congress certification of the Biden Presidency and hopes this will end election debate. Sino/US tensions eased slightly after the NYSE in a U-turn says it no longer plans to delist China companies, saying its decision was based on “further consultation” with regulatory authorities. Risk sentiment flips to risk-on after China’s CNY official rate fixes at its highest level in 30 months. CNY ends its day flat, while Asian currencies were mixed with THB, KRW and INR down 0.2% on average, while SGD, TWD and JPY strengthened 0.2% on average vs US$. Trading currencies remain volatile, ZAR fell significantly down 1.7% due to its new virus strain. Meanwhile other trading currencies saw NOK up 0.2%, NZD & MXN up 0.3%, and AUD strengthens up 0.5% vs US$. Intraday US politics and US Manufacturing data will provide direction.

Oil prices strengthened as OPEC failed to agree on Feb output cuts and will resume talks today. Saudi Arabia argued against pumping more oil due to global virus lockdowns, while Russia led calls for higher production citing recovering demand. Tensions increased with Iran’s seizer of a S.Korean tanker, saying that Korea owed it $7 bln. C$ volatility continues after trading in a 1.2661 to 1.2798 range yesterday as markets risk sentiment swings between risk on and risk off.  Uncertainty over the US Senate runoff elections in Georgia, the US Presidents vote comments and OPEC split of output all contributed to C$ volatility. Focus will remain on the Georgia election, OPEC and US data releases for intraday direction. Support shifts to 1.2660 resistance lowering to 1.2800.

Eur rebounds ahead of the Georgia elections and a weaker US$. Markets remain volatile heading into the Georgia elections, the UK’s lockdown and concern that the new virus strain could spread across Europe. Vaccination efforts across Europe is progressing at a disappointingly slow pace, which could cause current lockdown measure to be extended. Analysts are expressing concern for Euro predicting Q1/21 targets for Euro to weaken to 1.21 vs US$. Support at 1.2125 with resistance at 1.2325.

GBP holds near 1.36 amid surging virus cases and tighter lockdowns measures. Post-Brexit takes a backseat for markets focus on the UK’s tackling of the surging virus cases and its vaccination efforts. In response to the new B.1.1.7 virus strain the UK PM announced a more aggressive national lockdown with a pre-summed end-date in mid-February. Intraday GBP direction will be driven by the US$ and will focus on Georgia elections and US data releases. Support 1.3515, with resistance at 1.3773 (May2018).