Wednesday March 10th, 2021

Oil prices & US yields are steady, equity & commodity prices are mixed & the US$ is higher as markets await US data & US Stimulus updates. The US House is expected to pass the US$1.9T covid relief bill as soon as this morning, with the aim that President Biden will sign it before the unemployment aid program expires on Sunday. The US has administered 96.6m vaccinations and Alaska has become the first state to offer vaccination jabs to anyone aged 16 or more. Alaska is being touted as the venue for the first US & China high level meeting under President Bidens administration. Today saw Chinese producer prices rise at the fastest pace in 2 years, highlighting the risks of global inflation. Today’s FT article “Why inflation is at risk of overshooting the Fed’s comfort zone”, forecasting that by Q3/21 the US economy will recoup its lost output. Investors will be focusing rising US yields with todays 10-year treasury auction. As well, US CPI data release today with expectations of a pick-up in inflation fueled by rising oil pricing. The US$ is stronger across the board with CNY down 0.1% and Asian currencies are down 0.3% on average vs US$. Trading currencies are also lower with ZAR off 0.1%, NZD, MXN & NOK down 0.25%, JPY & AUD lower 0.35% vs US$. All focus remains on the US stimulus, CPI & US treasury yields.

Oil prices hold steady after weakening on Tuesday on higher US Crude inventories, markets have switched its focus to today’s EIA inventories data release for direction. Oil is finding support from the OECD report, while higher oil prices are expected to bring more US Crude back online. C$ continues to trade within its current trading range driven by fluctuations in both oil and US$ strengths. The positive OECD outlook, increasing Canadian vaccination optimism and the US stimulus are building a stronger C$ story. Focus shifts to the BoC who is expected to keep rates unchanged, but investors will be focusing on the BoC Governors statement for signs of rising rates into 2022 as the economic outlook improves. Bias to sell US$ on rallies over 1.2750. Support rises to 1.2610 as resistance lifts to 1.2690.

Euro holds around 1.19 as markets remain focused on US yields amid US CPI data and 10-year treasury auction. Intraday it is all going to be US news that will drive intraday currency direction. Domestically the EU continues to struggle with its sluggish coronavirus vaccination rollout, while Italy battles a rise in new covid cases. The UK speaks out over “completely false” claims that it banned vaccine exports to the EU. Meanwhile Russia is seeking to make Sputnik V in Italy as demand surges. Focus remains on the US data and US stimulus updates. Support holds 1.1850 with Resistance drops to 1.1950.

EURGBP remains steady as the US$ rebounds vs both EUR and GBP. EURGBP remains vulnerable to further weakness vs GBP on the UK’s vaccination/economic recovery story continues.  Support holds .8560 (1.1682) with resistance lower 8650 (1.1560).

GBP bounces off its intraday lows as it focuses on US data and the US Stimulus vote. The pound had an active European trading session ranging from 1.3850 to 1.3910 and is holding near 1.3875. The UK optimism continues to be driven by its strong vaccination campaign and expectations of a strong economic rebound. Any further rise in US treasury yields could trump the UK positive story and put the pound on the back-foot vs the US$. Our bias remains for a stronger GBP vs non-US-currencies but could be vulnerable to a stronger US$. Support holds at 1.3840 while resistance remains at 1.3925.