Tuesday June 15th, 2021

The US$ rebounds, oil prices extend gains, equity markets are higher, while US yields dip as markets remain cautious ahead of the FOMC statement. The Fed uncertainty is fueling cautious US$ buying to fresh multi-week highs as traders await the FOMC statement on Wednesday. The Fed has maintained its narrative of transitory inflation and keeping its easy monetary policy, but any hints in their statement of future tapering in its bond purchases will impact markets. Expect the US$ to remain supported ahead of the FOMC statement, but post-FOMC statement expect market volatility to increase. Today, President Bident is set for his 1st EU summit, with the potential of an Airbus/Boeing subsidies agreement and direction on Steel & aluminum tariffs announced at the summit. Sino/West relationship remains strained as NATO warns China’s military ambitions threaten global order, while Beijing calls NATO’s communique as “slander”. In the currency markets the US$ rebounds strongly from overnight weakness as investors turn to the dollar ahead of the FOMC statement on Wednesday. CNY strengthens slightly up 0.05%, while Asian currencies are down marginally at 0.05% on average vs US$. Trading currencies are mixed with JPY & MXN are up 0.05% while NOK is flat, NZD is down 0.15%, AUD & ZAR fall 0.25% vs US$. Intraday focus will be on US Retail Sales and US PPI data releases for direction ahead of tomorrows FOMC statement. 

Oil prices strengthens to it’s highest levels since 2018 with Brent crude gaining for a 4th-straight day and breaching US$73bp. Tehran’s nuclear talks continue, described as “intense”, but it’s unlikely an agreement will be achieved until after the June 18th Iranian Presidential election. C$ edges lower despite strengthening oil prices as investors focus on the FOMC and the prospect that the Fed may change its stance on tapering, which is driving the US$ stronger. The easing of Canadian lockdown measure should provide a lift to export demand and alongside stronger oil prices will likely provide an underlying support to C$. Cad Housing Starts, with US Retail sales and US PPI will provide intraday direction. Support holds at 1.2050 with key pivot at 1.1916 (May2015) key resistance at 1.2235.

Euro continues under pressure but holds above 1.2100 ahead of the FOMC meeting. The EU braces for its first Biden/EU summit where markets expect to see a strengthening of relationships with the prosect of ending of tariffs between the US and the EU. Domestically the ECB continues to support the EU economy with ongoing stimulus, vaccination campaign continues at full speed and domestic markets continue to re-open from lockdown restrictions. Bias remains to buy Euro on dips, but ahead of the FOMC statement the single currency remains vulnerable to further weakness. Support drops to 1.2035, while resistance resets to 1.2175.

EURGBP rallies on GBP weakness the UK stalled reopening and ongoing Brexit concerns. Support holds at .8550 (1.1695) with resistance remaining at .8665 (1.1540).

GBP remains under pressure despite upbeat UK jobs report. The pound rallied in early trading, but its strength was short lived on pre-FOMC US$ buying, Brexit uncertainty and delayed re-opening takes its toll. Generally, markets are caught in a US taper or not to taper scenario which is driving the US$ higher. Supporting the GBP is its rebounding economy, 44% of its population are fully vaccinated and the prospect BoE could raise its rates into 2022. Intraday US data releases and the start of the FOMC will dictate intraday direction. Support holds1.4040, with resistance resets to 1.4160, key resistance holds at 1.4235 (Feb2021).