Wednesday April 28th, 2021

US$ & US yields inch higher, oil prices are flat, and equity markets are positive ahead of the Fed meeting today. The Fed is not expected to make any policy changes this week, but the Fed Chair is expected to acknowledge the strengthening US economy. Many economists believe that this will be the last meeting before the Fed will start to ease its asset buying program. Following the Fed, the focus will switch to the Presidential address before a joint session of Congress where he will unveil US$1.8T plan in investments and tax credits aimed towards children and families. The new plan comes less than a month after he put forward his US$2T infrastructure plan. Together the plans highlight the administrations vision to overhaul the US economy from the coronavirus pandemic. The US$ index moves higher as markets anticipate increasing volatility into the Fed chairs comments. CNY and Asian currency are flat on average ahead of the Fed. Trading currencies remain mixed with ZAR & NZD up 0.1%, while MXN and NOK are flat, and AUD & JPY fall 0.25% vs US$. Intraday the Fed Chairs comments will be a key driver for currencies today and then focus will shift to the US Presidential address to congress.

Oil prices holds flat as underlying global recovery optimism balances demand concerns related to coronavirus lockdowns and OPEC maintaining loosening output cuts starting on May 1st. In other oil news, Goldman sees oil demand to increase by 5.2M BPD into Q3 and Saudi is in talks to sell 1% of Aramco to a leading global energy company. C$ slips from its multi-week highs as oil prices ease in overnight trading and the US$ & US yields edge higher into the FOMC rate decision. Intraday Canadian Retail Sales will be watched closely, but the Fed comments will be the primary market driver. Support holds at 1.2380 with resistance lower at 1.2460. 

Euro drifts lower but holds above the key 1.2050 level ahead of the FOMC. ECB President Lagarde will be speaking today, but her comments will likely have little impact on markets as investors wait for the FOMC decision & comments. EU lawmakers signed the final agreement to ratify the UK-EU Brexit. in other news, France & Germany push for a speedy approval & roll out of the EU states Eur750B pandemic recovery plan. Euro will be likely capped towards 1.21 but is vulnerable to a quick sell off on any unexpected Fed comments. Support holds at 1.2035 and resistance at 1.2125.

EURGBP continues to stall at the key .8700 as markets await the FOMC today. Analysts remain bearish Eur looking for a potential move towards 0.83 (1.2048) vs GBP into H2/2021. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP eases ahead of the Fed and ongoing political worries for the UK PM. The UK PM’s apartment controversy continues, but is more of a distraction for GBP vs a primary driver of direction. Brexit completed, ongoing strong UK vaccination strategy and unwinding of UK lockdown restrictions will continue to support the pound in coming months. Intraday the Fed’s comments will be primary driver for currencies today. Support at 1.3850, while resistance holds at 1.3940.