The US$ edges lower, oil prices strengthen, equity markets are mixed while US yields inch higher ahead of five Fed speeches & the Fed’s Beige Book today. Markets will focus on Fed Chairs speech and four other Fed presidents speaking today, all of whom are expected to mirror Tuesday’s Fed Hawkers comments. US inflation will remain the prime focus after Tuesdays CPI saw headline inflation jump by its fastest rate in more than 8 years, but “the Fed is not going to pull back support yet” said Philadelphia Fed Reserve Bank President Harker on Tuesday. Harker said the Fed wants inflation to run above its 2% to make up for long periods of falling short of the goal. The US$ nears 1-month lows as strong demand at the US bond auctions weakened US treasury yields, reducing the higher the US’s interest rate advantage and weakening the US$. In other news, Sino/US tension remain high as China criticizes the US over its Taiwan visit. TWD weakens 0.2% on rising Chinese tensions, while CNY strengthens 0.2%, and Asian currencies strengthen 0.25% on averages vs US$. Trading currencies rallied with JPY & ZAR are up 0.1%, NOK higher 0.4%, AUD stronger 0.62%, NZD rallies 0.8% while MXN holds flat vs US$. Intraday US bank earnings, FED comments and the Fed Beige Book will provide direction.
Oil prices strengthen for a 3rd day, up +1.5% as US inventory drops and on strong economic data out of China & the US which helps support an improved demand outlook. On Tuesday OPEC raised its global demand forecast by 70kbpd from March and expects global demand to rise by almost 6million bpd in 2021. C$ extended its gains on the combination of strengthening oil prices and a weaker US$. The C$ is outperforming its peers as it continues to benefit from the re-opening “trade” as energy and core commodity demand increases. Support resets to 1.2515 with resistance lowering to 1.2615.
Euro strengthens above 1.1950, hitting a fresh 3-week high on a weakening US$ from strong US bond demand. Markets will be focusing on the ECB’s annual report 2020 with several ECB board members speaking including President Lagarde. Expect ECB comments to remain consistent, highlighting the banks support to the EU’s economic recovery. The Fed will be speaking as well today and the ongoing speeches of late we are not looking for anything new to said. Vaccinations remain the key focus for the EU with J&J joining AstraZenca with blood clotting issues, which will impact the EU’s vaccinations progress. Support rises to 1.1890 and resistance resetting at 1.1975.
EURGBP holds steady trading flat on the day. The halting of J&J vaccine will have a greater impact on the EU vs the UK, expect EURGBP to be toppish at .8700. Support rebounds to .8585 (1.11650) with resistance at .8700 (1.1495).
GBP tests a 1-week high vs US$ amid a weaker US$, but the BoE chief economist resignation is putting some pressure on the pound. BoE Haldane who was a more hawkish figure at the Bank and his resignation is having a short-term negative impact on the pound. The halting of the J&J vaccines deliveries following the US FDA’s investigation will have a lesser impact on the pound as it already of its inoculation targets. The relaxation of lockdown restrictions and the reopening of the UK economy should continue to support the pound. Support holds 1.3705, while resistance resets at 1.3810.