Tuesday March 9th, 2021

Equity & oil prices rally, US yields stabilize & the US$ retraces as markets remain focused on the US stimulus bill. The OECD says that the US stimulus package will boost global recovery from Covid by 1% and raised its 2021 global GDP growth forecast to 5.6% from 4.2% previously. The OECD also significantly raised the US GDP forecast to 6.5 from 3.2% previously. The House is set to pass the US$1.9T stimulus bill by Wednesday, putting President Biden on track to sign the bill this week. In other news, the US Treasury Secretary Yellen said Monday that the US Stimulus package would provide enough resources to fuel a “very strong” US economic recovery. The US Secretary also asserted that the US has tool to deal with inflation, which added pressure to US yields. China’s state funds are said to have intervened in the equity market, but it fails to lift market sentiment and the CSI 300 closes down 2.2%. CNY strengthened 0.21%, while Asian currencies rallied 0.3% on average vs US$. Trading currencies also rallied vs the US$ with JPY up 0.1%, NZD up 0.5%, AUD & NOK strengthen 0.75%, ZAR & MXN rallies 1.2%. Focus remains on US yields and US stimulus updates.

Oil prices rebound 1% on a combination of demand growth optimism related to the US stimulus, expectations of falling US crude inventories and OPEC+ output controls. C$ strengthened as oil Brent Crude retests US$69pb and US$ falls on lower US yields. The OECD raises Canada’s 2021 GDP growth forecast to 4.7% from 3.5% previously.  Markets will now focus on Wednesdays BoC’s rate statement and interest rate decision. Intraday US yields and oil prices will dictate direction. Support drops to minor 1.2580, if breached we could see extension towards 2021 lows 1.2464, with resistance at 1.2650.

Euro retest’s 1.19 as US yields retreat from their recent highs. Euro continues to lag its peers as vaccination delays and lingering lockdowns continue to hinder the EU’s recovery. The latest ECB bond buying slows despite market concerns as Eurozone financing cost start to rise.  The OECD raises the 2021 Eurozone GDP forecast moderately compared to its peers from +3.9% from previously +3.6%. Eurozone Q4 GDP -0.7% vs -0.6% with household consumption falling 3% Q/Q. Bias remains bearish on Euro in the short term. Support holds 1.1850 with Resistance remaining at 1.1975. 

EURGBP holds steady today but overall extended its losses yesterday, down 4.9% YTD. EURGBP remains vulnerable to further weakness vs GBP on the UK’s vaccination/economic recovery story.  Support holds .8560 (1.1682) with resistance lower 8650 (1.1560).

GBP advances towards 1.3900 amid US$ weakness. The combination of weaker US yields, the positive UK vaccination progress and BoE Governor Bailey pushing back against negative interest rates. The pound found additional support as the OECD raised the UK’s 2021 GDP forecast to 5.1% from 4.2%. Focus remains on US yields and US stimulus updates, but we remain bullish GBP short term vs its peers. Support rises to 1.3840 while resistance extends to 1.3925.