Wednesday June 30th, 2021

The US$ & oil prices edge higher, equity markets & US yields are lower ahead of US ADP jobs data today. The ADP Employment Change is expected at 600k vs previous 978k, the results will be watched closely, although not necessarily predictive for Friday’s key NFP it will be watched closely for guidance. Investors have become more sensitive than usual on the US Jobs data after the Fed’s shifted this month to a more hawkish guidance. On Tuesday a very optimistic Fed Governor Waller said “The unemployment rate would have to drop fairly substantially, or inflation would have to really continue at a very high rate, before we could take seriously see a rate hike in 2022, but I am not ruling it out”. In other news, the OECD meets July 1st, and are expected to discuss the global minimum corporate tax rate at 15%. On Tuesday President Biden pitches the bipartisan infrastructure deal as a ‘generational investment’. In the currency markets, the US$ Index has rallied 2.3% to date in June and markets are focused on Friday’s US NFP for the next move in US$ direction. In Asia, CNY strengthened 0.15%, while Asian currencies are up 0.1% on average vs US$. Trading currencies are mixed with JPY flat, AUD & NZD are down 0.05%, MXN weakens 0.2%, while NOK edges higher 0.1%, ZAR rebounds up 0.3%. A flurry of US data to focus on with US ADP Employment Change, Chicago PMI, & US Pending Home sales will provide intraday direction.

Oil prices rebound as US stockpiles fall and OPEC Secretary General said on Tuesday that demand is expected to rise by 5 million barrels per day in H2/21. Markets will be focused on Thursday’s OPEC+ meeting July 1st, where expectations are that current supply curbs will be eased. C$ extends its weekly losses as rising delta variant cases across Asia continue to put pressure on commodity linked currencies. Today sees a flurry of data releases including Canadian GDP which is expected to dip to 0.8% vs 1.1% previously and the US the ADP Jobs which will provide intraday direction. Ahead of Fridays US NFP expect C$ has room to ease further. Support resets to 1.2350, and resistance rises to 1.2450.

Euro remains under pressure as delta variant cases see safe-haven, risk-off US$ buying. Domestically eurozone inflation came in as expected with core inflation at 0.9% which is a far cry from the US inflation at 3.4%. The rise in delta variants within Europe could postpone full reopening with several EU countries barring travelers from the UK and other countries with rising variant cases. Market volatility my increase with US data releases and Quarter end flows, expect Euro to remain under pressure ahead of Friday NFP data. Support holds at 1.1850 while resistance lowers to 1.1950.

EURGBP disappointing EZ inflation data and rising variant restrictions across the EU put pressure on Euro. Support holds at .8550 (1.1695) if breached look for .8495 Apr 5th (1.1770) with resistance remaining at .8665 (1.1540).

GBP rebounds from its intraday lows amid mixed UK data and the prospect of full reopening. UK GDP missed expectations Q/Q, but hit expectations on Y/Y basis, while current account Q1 beat expectations. The UK PM & UK Health minister commented that the UK will likely ease restrictions/fully open on July 19th and the country will learn to live with the covid virus. Lastly, England’s 2-0 victory over Germany and progressing to the next round of UEFA Euro 2020 will certainly help boost domestic beer sales. All in all, the pound remains vulnerable to further weakness despite the footy excitement. Support resets 1.3800, while resistance resets to 1.3910.