Wednesday April 21st, 2021

The US$ rebounds, oil prices weaken, equity markets are mixed and US yields inch higher as risk sentiment eases. Equity and oil prices remain under pressure following 2-days of declines amid concerns of rising global virus infections and the potential new variants will impact the pace of the world’s economic recovery. Global virus cases continue to rise, India saw its daily virus cases hit +295,000. Former Treasury secretary Lew said President Biden’s economic plan will help the US compete with China. Lew went on to say he thought the two countries could work together on climate change, health care and challenges with Iran & N.Korea. This week, President Xi agreed to join President Biden’s climate summit which is a positive sign for Sino/US tensions. The US$ rebounds from 7-week lows as risk-off sentiment rises. CNY is flat while Asian currencies are down 0.15% on average vs US$. Trading currencies are mixed with NOK down 0.15%, JPY, MXN & AUD are flat while NZD & ZAR are up 0.1% vs US$. No key data release today so markets will remain focused on US stimulus and covid updates.

Oil prices fall 1% weighed down by demand concerns as covid cases continue to surge globally. India the worlds 3rd largest consumer of oil remains in lockdown after posting a record number of virus cases overnight. The C$ is holding steady after Tuesday’s biggest fall in almost 8-weeks, down 0.7% as oil prices weakened and the US$ rebounds. Today will be a busy day for the Canadian markets with CPI out this morning and the BOC interest rate decision. Markets expect the BOC to keep rates on hold, but it is expected to announce the tapering of its asset purchases. Support rises to 1.2545 with resistance shifting to 1.2630. 

Euro drops back towards 1.2 as the US$ gains as rising global virus cases dents risk on sentiment. The EU’s shots in the arm strategy should help provide underlying support to the Euro on dips. The vaccination efforts got a boost with J&J to restart vaccine shipments to Europe after it received the EU regulatory green light. Adding support to the single currency the German constitutional court gave the approval to deploy funds for the EU recovery stimulus. With no key data out today, markets will continue to focus on covid updates as rising rates has impacted risk-on trading. Support rises to 1.1980 and resistance resetting at 1.2075.

EURGBP weakens despite EU’s strengthening vaccination efforts and the boost that J&J will start shipping doses to Europe again which should provided support to the Euro. Support holds to .8585 (1.11650) with resistance remaining at .8700 (1.1495).

GBP weakens from its 2-month highs amid mixed UK data, covid warnings and easing of risk sentiment. The UK PM insisted the UK is still on track to reopen the economy which aims to end restrictions by June 21st but warns of a new covid third wave into the winter flu season. The UK had a flurry of data this morning which saw PPI beat expectations, but disappointingly CPI fell short of expectations while Retail Sales came in as expected. UK NI minister said they will continue to work with the EU to resolve the ongoing flow of goods/border issues post Brexit. Support at 1.3900, while resistance resets at 1.4000.