Wednesday November 25th, 2020

The US$ consolidates, equity markets ease, while oil prices extend gains ahead of the US Thanksgiving holiday. Risk on appetite remains as the US Presidential-Election transitions smooths out and key cabinet members are named. Equity & currency markets drop slightly as markets take some profits. The Treasury secretary will give $455bln in treasury funding to congress when it expires Dec31st, which will be a setback for the new Biden administration. In other news, The White House considers rescinding entry bans for non-US citizens from Brazil UK, Ireland any 26 EU counties. CNY is down 0.2% while Asian currencies are down 0.1% on average vs US$. Trading currencies have consolidated with JPY, ZAR & NZD down 0.1%, while AUD, MXN & ZAR are down 0.3% vs US$. Intraday markets will focus on a flurry US data being released today including Durable Goods Orders, GDP & Michigan Consumer Sentiment Index, Initial Jobless Claims and FOMC minutes. 

Oil prices continue to strengthen up 1.5% with Brent crude over US$48.50 in a sustained vaccine rally. China’s crude imports drop against most of its global suppliers with imports from Saudi Arabia down 30%, while imports from the US is up 70%. C$ rallies on rising oil & equity markets helping the loonie test 1.2986 in early trading. Intraday we expect C$ to consolidate and focus on US data results which will provide intraday direction. Support holds at 1.2924 (Nov9th), while resistance at 1.3110 followed by 1.3172.

Euro tests 10-week highs in early trading, but loses momentum ahead of the N.American open. The risk on sentiment is supporting Euro, but ongoing concerns of possible ECB response if Euro tests 1.20 is calming overall investor sentiment. The ECB warned European banks they may need to set aside more money to prepare for increased bad-loan provisions. The EU has proposed new rules to allow companies to access public and private data in an effort to boost innovation to compete with the US and Asia. Intraday US data releases will dictate direction to the single currency. Support holds 1.1815 with resistance at 1.1920, if breached look for a test 1.2011(sep1st).

GBP eases as markets await the results from a heavy day of US data releases. GBP rallied overnight on Brexit optimism as the absence of news is perceived as positive progress by investors. In the short-term investors continue focus on Brexit while they ignore the cost of the pandemic on the UK’s economy. The UK’s pandemic bond costs is approaching ½ a trillion pounds as it continues its borrowings to help fund coronavirus relief. The National debt has climbed above 2 trillion pounds and the Chancellor is set to announce further spending increases on public services. Intraday Brexit news and US data will direct intraday direction. Support holds at 1.3280, with minor resistance at 1.3420, if breached look for possible extension to 1.3482 (Sep1st).