Wednesday April 7th, 2021

Oil prices fluctuating, equity markets mixed, US$ and US yields are flat as markets await the release of the Fed meeting minutes & US infrastructure plan update today. The Fed meeting minutes will be scrutinized for hints about policymakers’ views on rising yields, inflation, and possible timelines for tapering asset purchases. The US President Biden will be speaking and will continue to press for support for the US$2T infrastructure plan. The G20 has agreed to fund the IMF US$650Bln so it can better help vulnerable countries deal with the effects of the coronavirus pandemic. The coronavirus “have’s and have nots” are growing as Brazil’s covid-deaths hit +4,000 in a day on Tuesday and France’s hospitalizations near 5-month highs, while the US & UK vaccination programs are allowing them to reopen their economies. CNY dips 0.5%, INR tumbles 1.3% on rising covid concerns, while Asian currencies are down 0.2% on average vs US$. Trading currencies are weaker with MXN weaker 0.05%, NOK, NZD & ZAR are down 0.25%, while the AUD falls 0.45%. Intraday the Fed minutes and US Goods & Service Trade balance data will provide intraday direction.

Oil prices is fluctuating between 1% up and down as markets balance as expectations of increased output by OPEC+ and possibly Iran has offset the stronger demand optimism as economic outlook improves. The ongoing lockdowns and increasing covid cases across Europe and India have seen a rise in gasoline inventories rise. C$ weakened on early weakness in oil prices and concerns about increasing 3rd wave lockdowns across the country. On a positive note, the IMF yesterday raised Canadas’s growth forecast by 1.4% to 5%. Markets will focus on Canadian Intl Merchandise Trade data alongside US Goods & Services Trade Balance for intraday direction. Support rises to 1.2540 with resistance holding at 1.2615 if breached look for an extension to 1.2660. 

EUR rallies aggressively towards 1.19 on vaccination optimism and strong PMI data. The EU upgraded its projections for getting its population inoculated by September and the IMF included the EU when it lifted its global growth estimates to 6%. Better than expected Services PMI across Europe increased market confidence as all but Italy beat expectations. Overall, the positive PMI data is not likely to maintain the current Euro strength and our bias remains to sell into the current rally. Support resets to 1.1800 with resistance at 1.1920

EURGBP strengthens to two-week highs, up 1.1% mtd as GBP faced fresh selling pressure. Our bias remains to sell Euro on rallies as the prospect remains high that the UK’s economy will rebound quicker than its EU counterpart as the UK reopens its economy.  Support rebounds to .8525 (1.1730) with resistance at .8625 (1.1595).

GBP holds on to 1.38 vs US$ as the UK increases its vaccination arsenal. The UK adding Moderna to its vaccination toolbox and is continuing to expand its vaccination program. The UK is on track to allow non-essential stores to reopen on April 12th and the GBP should continue to find support as its economy comes back online. Markets will remain focused on the Fed minutes as speculation of rising inflation would support high US yields and a stronger US$ scenario. Support holds at 1.3810 and resistance resets at 1.3895.