Wednesday November 18th, 2020

Risk-on sentiment continues with equity, currency and oil markets all edging higher on vaccine hopes. Pfizer announced its vaccine is 95% effective in final analysis of the big trial, Pfizer now plans to file for emergency-use authorization from the FDA. The Fed Chair comments yesterday maintained his concerns over the impact of the pandemic on the US economy and expectations of a labored recovery. Ongoing US election concerns and weak retail sales kept pressure on the US$. The US$ index remains under pressure, down almost 2% MTD vs a basket of major currencies. CNY up 0.1% extending its multi-year gains, while Asian currencies are up 0.15% on average vs US$. Trading currencies are stronger with ZAR, NZD & JPY up 0.1%, MXN & NZD up 0.25% and NOK up 0.45% vs US$. US election updates alongside, vaccine updates and US Building Permits, US Housing starts change will provide some intraday direction.

Oil prices extend gains up 1%, supported by OPEC’s output controls, vaccine hopes and expectations that China will continue their commercial oil stockpiling buying into 2021. C$ rebounded from yesterday’s lows from stronger oil prices and a strengthening of equity markets. Investors are returning to C$ in anticipation of a post pandemic world and the expected rebound in commodity prices. Intraday Canadian CPI data will be watched closely alongside BoC Wilkins speech. Support 1.3025 and resistance at 1.3170.

Euro holds around the key 1.1880 resistance level as markets grapple with vaccine hopes verses the current reality of rising coronavirus across the EU. The ECB President said a coronavirus vaccine is no game changer for forecasts, as a 2021 immunization had already been factored in. EBC Lagarde stated that additional stimulus is coming, this will likely be announced at the December ECB meeting. Euro has room to rally, but markets remains cautious of a possible ECB’s response if the single currency approaches 1.2. Support holding at 1.1780 with resistance at 1.1800, if breached look for a test 1.2011(sep1st)

GBP continues to inch higher amid Brexit optimism and upbeat economic data. Released today the UK CPI, Retail Price Index and PPI all exceeded expectations in October. Brexit optimism grew from a newspaper comment that France may be forgoing some of its demands on fisheries opening the door to a possible Brexit deal next week. The EU/UK continue Brexit negotiations, but a breakthrough isn’t expected by Thursday EU summit. Covid remains a key focus for the UK as the 7-day rolling average continues to rise prompting speculation that the Dec 2nd lockdown expiry may be extended. Brexit continues to be GBP’s primary driver. Support 1.3150 with resistance extends to 1.3325, if breached look for possible extension to 1.3482 (Sep1st).