Global equity markets strengthen, Euro hits four-month highs and trade related currencies strengthen on vaccine hopes. An experimental vaccine from US company Moderna which has provoked safe immune responses in early-stage studies gave investors fresh confidence and boosted markets. Sino/US tensions increase with possible sanctions related to China in the South China Sea and the official end to HK’s special status to punish China for its “oppressive actions”, China has said it would impose retaliatory sanctions. US$ weakened to its lowest level for the month vs a basket of major currencies, with Zar, Mxn, Aud, Nzd & Nok all rallying +1/2% vs US$. Markets will focus on coronavirus updates, US Industrial Production for June and Fed’s Beige book for intraday direction.
Oil remains steady finding support from a drop in US crude inventories, with the markets waiting for OPEC+ decision on future oil output which are expected to taper from 9.7m bpd to 7.7m bpd. C$ rallied less than its peers as rising covid cases and fresh lockdown measures across the states will have a deeper impact on Canada’s export products. Intraday BoC rate decision which will likely see rates remain on hold, a focus to deliver on stable inflation and C$ to remain within its current range. Support 1.3535, with resistance 1.3640 with the bias remaining to buy US$ dips.
Euro rallies to a four-month high boosted by vaccine and EU fund hopes offsetting concerns of rising US coronavirus cases and rising US/Sino tensions. Despite local virus flare ups the EU is on continuing on track to opening up its economies. Growing optimism on the EU’s 750 bln-Euro coronavirus recovery fund helped boost Euro and reduce Italy & Spain’s borrowing costs. Support rises to 1.1350, the Euro breached 1.1403 (Jun 11 high), the next key resistance is 1.1492 (2020 highs)
GBP had a significant rebound finding support from a weaker US$, strong UK CPI and coronavirus hopes. CPI rose by 0.6% demonstrating stability and decreasing deflation fears. The strange CPI data and vaccine hopes were positive for the pound, but unproductive Brexit talks remains an anchor for the currency as negotiations continue without any signs of breaking the current stalemate. Support at 1.2480 with resistance expected to hold at 1.2660 the previous 3 sessions high.