Wednesday 7th October, 2020

Currency markets rebound after the US President’s surprised markets yesterday halting the US stimulus relief talks until after the US election. The US$ initially strengthened on safe haven buying after the US Presidents tweet, but the US$ steadied in the overnight markets. The US$ index eased from its overnight highs, with Asian currencies up 0.3% on average, while JPY is down 0.4% vs US$. Trading currencies NZD is flat, NOK is up 0.5%, MXN is up 1%, AUD strengthens 0.25%, and ZAR strengthens 0.5% vs US$. The markets will focus on the FOMC minutes today after the Fed’s Chairs message on Tuesdays saying the US economy is “highly uncertain” and too little policy support could lead to more household and business insolvencies. Alongside the FOMC minutes, five Fed Presidents are also scheduled to speak today. 

Oil prices fall 2% on rising US crude stockpiles and the termination of US Stimulus talks until after the election. Oil is finding some support from output concerns from the Norwegian oil field strike and the shutting of the US Gulf Oil platforms as Hurricane Delta strengthens. C$ weakened on the slowdown of Canada’s merchandise trade and extended its weakness on the US President’s stimulus tweet. C$ steadies below 1.3330 as markets consolidate on expectations a stimulus relief will be forthcoming after the election. Intraday focus will shift to Canada’s Ivey Purchasing Managers index, EIA Crude Oil stock change and FOMC minutes. Support at 1.3270, with resistance at 1.3330, if breached look for 1.3400.

Euro rebounds from Tuesdays lows after digesting the breakup of US stimulus talks and the focus shifts back to the central banks. The ECB President’s will be speaking following the non-Monetary Policy ECB meeting. President Legard is expected to raise concerns that the containment measure that have to be taken by the EU leaders. Following the ECB, the focus will shift to the FOMC minutes. Analysts are targeting a short term move to 1.1670 levels but are looking for a stronger Euro into year end. Support/pivot at 1.1670 with resistance holding at 1.1800, if breached look for 1.1865 next.

GBP continues to track lower amid growing Brexit concerns. As Brexit deadlines loom comments from the Irish foreign minister expressing dissatisfaction over the UK’s stance on state aid and fisheries, highlighting Brexit negotiation tensions. The positive is that Brexit talks are continuing so there is still a ray of hope that the negotiators may still find some common ground. Intraday Brexit updates, response to FOMC Minutes will provide direction to the GBP. Support 1.2825 if breached look for 1.2755 with resistance lowering to 1.2935.