Tuesday March 23rd, 2021

Equity and oil markets are down, US yields ease while US$ rally ahead of Powell & Yellen testimony. Fed Chair Powell and Treasury Secretary Yellen are due to make their first joint appearance in front of the US House committee on Financials services, likely focusing on inflation and deficits. In prepared remarks, Powell said economic recover had “progressed more quickly than generally expected and looks to be strengthening” – he also warned that the economic recovery was “far from complete”. The White house is expected to introduce a two-part US$3T jobs and infrastructure proposal to President Biden as soon as this week. Sino/western tensions continue as Beijing retaliates by imposing travel bans after the US, EU, UK & Canada impose sanctions on China over its treatment of the Uighur Muslims. The risk-off mode has seen CNY drops 0.1% while Asian currencies drop 0.2% on average vs US$. High volatility in trading currencies was mixed, with JPY stronger up 0.3% on safe haven buying, meanwhile NOK falls 0.85%, AUD drops 1%, MXN & ZAR weaken 1.25% and NZD tumbles 1.8% driven by downturn in domestic rate expectations. A very busy day, alongside the Fed & Treasury Secretary testimony today, with US New Home Sales, Richmond Fed manufacturing Index and 5 other Fed officials also speaking today. 

Oil prices drop 3% as European pandemic curbs and slow vaccine rollout continues to slow demand requirements. Meanwhile Barclays raised its oil forecasts today for Brent crude to US$66pb in 2021 and US$71 in 2022. C$ continues to weaken as it tracks falling oil prices and breaks through the key 1.2550 level. Rising lockdown measures across Europe reducing oil demand, sluggish vaccination rollout within Canada and rising virus variant concerns is seeing a shift to risk-off sentiment as countries prepare for a 3rd wave. No key Canadian data releases today, markets will focus on more Fed speech, as well BoC Gravelle will also be speaking today. The break of 1.2550 opens up a move to minor resistance at 1.2625, if breached look for potential extension to 1.2683 (Mar10th) while support rises to 1.2540. 

Euro drops amid European coronavirus concerns and a strengthening US$. Focus remains on the Fed Chair and the Treasury Secretary Yellen’s testimony today. Germany is expanding its lockdown measures until April 18thand is asking it citizens to stay at home in an attempt halt the 3rd wave of the virus. Sino/EU tensions rise which could jeopardize the December investment deal after the EU imposed sanctions against China for Human rights abuses. Risk off mood grows as markets await the latest round of Fed speeches. Support holds at 1.1835, if breached look for further weakness to 1.1750 while resistance remains at 1.1930. 

EURGBP rallies for a 2nd day despite EU lockdown concerns as markets focus on rising UK jobless claims and ongoing vaccination dispute between the EU and UK.  Support resets at  .8580 (1.1655) with resistance rises to  .8665 (1.1540).

GBP tumbles to 6-week lows as UK jobless claims rise and risk-on mood fades. The US$ continues to drive markets as the safe haven US$ rallies as 3rd wave fears rise and UK vaccination supply uncertainties continue. The US plan to rollout a US$3T infrastructure program generating investor flow back into the US$ as it overshadows the UK recovery efforts. The rise in February jobless claims is causing some concern for markets as it casts a shadow over UK PM’s “Build Build Build” strategy. Support drops to 1.3800 while resistance lowers to 1.3880, if breached 1.3940 next.