Tuesday July 13th, 2021

The US$ if flat, oil prices edge higher, while equity markets and US yields are mixed ahead of US inflation data. The US CPI ex food & energy is expected to moderate slightly to 0.4% vs 0.7% MoM (June) but rise to 4% vs 3.8% (June) YoY amid debates asking is inflation transitory or not. The inflation data will help set the stage for Fed Chair Powell testimony on Wednesday. The US$ is consolidating ahead of today’s inflation data, any miss on the data expectations will likely increase US$ volatility. In other news, President Biden warns US companies of risks of operating in Hong Kong. China’s export growth increases +32.2%, and its imports grow +36.7% as easing of global lockdowns helps spur demand for Chinese goods. Lumber futures tumble, suffering their worst month on record back to 1978 and returns to near pandemic lows. In the currency markets, ZAR falls over 1% for a 2nd day as it battles covid and civil unrest. CNY strengthened on its strong trade data and helps AUD gain despite covid lockdown concerns. CNY is up 0.15% while Asian currencies are down 0.1% on average vs US$. Trading currencies are mixed with AUD & NZD up 0.05%, JPY is up 0.1%, while MXN is down 0.2%, NOK falls 0.3% and ZAR tumbles 1.1% vs US$. Intraday focus will be on US CPI data for direction.

Oil prices edge higher amid the OPEC+ stalemate and rising demand. The OPEC+ deadlock means that until an agreement is reached, production quotas will remain unchanged and risks a price war as demand surges, says the IEA. C$ remains within its current 1.2450-1.2520 range as it balances a stronger US$ and oil price volatility. Uncertainty over oil prices remains a primary driver for the loonie, if we see US CPI within expectations, we will likely see C$ retest 1.2450 level. Intraday US CPI will be the driver and then focus will shift to the Fed Chairs testimony and the BOC Interest rate decision on Wednesday. Support holds at 1.2450 and resistance at 1.2540.

Euro consolidates near 1.1850 amid a dovish ECB President. ECB President said the bank will change its policy guidance at its July 22nd meeting. The ECB President took a dovish tone warning that covid 19 remains the top risk to the economy. A Reuters poll predicts that the ECB will taper its asset purchases after its September meeting and stop the tapering by March 2022. Markets remain cautious and Euro consolidates near its intraday lows ahead of the US CPI data results. Inflation concern is being balanced out with rising delta variant levels within the US could see pressure remain on EUR. Support at 1.1785 with resistance at 1.1890.

EURGBP strengthens slightly with the pound likely to remain under pressure ahead of July 19th reopening date. Support holds at .8550 (1.1695) if breached look for .8495 Apr 5th (1.1770) with resistance remaining at .8665 (1.1540).

GBP remains under pressure ahead of US CPI data. The combination of rising delta variants saw UK PM keeping to the July 19th reopening, but urging the public to remain vigilant. Over 68% of the UK population are fully vaccinated, but at the same time daily infections topped 34k. The BoE lifts its curbs and allows banks to pay dividends, as well as allowing bank share buy backs as the pandemic crisis fades but warns some asset prices look stretched. US inflation data will guide fx prices today but expect to see the pound remain under pressure. Support holds at 1.3750 while resistance resets to 1.3890.