Tuesday June 23rd, 2020

The “Recovery Rally” continues with equity and oil prices firmer and US$ index remaining under pressure vs a basket of major currencies. Positive PMI data out of Europe and the UK have helped currencies extend their rallies. Markets dipped in early Asian trading after a White House adviser said the US trade with China is over, he subsequently retracted his statement giving markets fresh energy to rally. CNY & Asian currencies remained stable, AUD & NZD strengthened, and MXN rallied 0.6% vs US$. NOK rallied 0.8% overnight and is the best performing G10 currency, rallying almost 18% since March, with the central bank already setting out plans to raise interest rates. Intraday the rise in coronavirus cases in the US remains a critical concern, markets will also focus on US PMI data, Richmond Fed manufacturing Index and New home sales change for direction today.

Oil prices strengthen after upbeat PMI data and the US President’s comment that the trade deal with China remains fully intact. Output cuts remain helping stabilize pricing, in the US & Canada drillers cut rig numbers to a record low even with oil prices hitting 3-month highs. C$ rallied ½% yesterday tracking stronger oil prices and is opening close to Monday’s highs. Momentum favours C$, but with the Canadian government still cautious to open its boarders to the US due to rising covid cases in the US, a risk to C$ continues. Support remains at 1.3500, a break could see a quick move to 1.3395 (Jun11 lows), resistance lowers to 1.3585. 

Euro staged a significant rebound, rallying over 100 basis points boosted by fresh investor “Risk-On” sentiment and supported by positive Eurozone PMI data. Affirmation that the Sino/US trade deal remains in place and markets expect the US President keep a constant message on trade into the elections. Focus shifts to the US PMI as investors look for positive signs that the economy is recovering. Support rises to 1.1175 and resistance at 1.1285.

GBP is boosted by the weakening US$ and better-than-expected PMI data in both Manufacturing & Service sectors. In a new twist to Brexit, Japan has given the UK just 6-weeks to sign up to a post-Brexit trade deal or face disruption to its imports and exports. The UK had enjoyed favourable access to Japanese markets via its EU membership and now it is facing negative concessions as it starts to seek new global deals. Support rises to 1.2350 1.2320 with resistance at 1.2500.