Wednesday October 21st, 2020

US Stimulus hopes causes the US$ to weaken prompting risk currencies to rally. House Speaker Pelosi said talks with the Treasury Secretary Mnuchin on Tuesday were productive, but Senate leader McConnel warns the White House against dividing Republicans with rushed covid-19 stimulus deal. The US$ index remains under pressure, down 1.2% MTD hitting 6-week lows as US stimulus hopes prevails. CNY +0.4%, testing 27-month highs driven by positive domestic data and a weaker US$. Asian currencies rally 0.15% on average, while JPY rallies 0.6%. AUD and NZD rallies are muted due to expectations of monetary easing in both countries. Trading currencies, MXN up 0.35%, ZAR up 0.5% and NOK rallies 0.75% vs US$. No key US data releases today, so markets remain focused on US Stimulus updates which will dictate intraday direction.

Oil prices slip over -1% despite US stimulus hopes as demand concerns increases after a surprise build-up in US crude stockpiles. C$ extended its gains Tuesday to test 1-week highs, boosted by positive comments from House Speaker Pelosi on US Stimulus. Domestically PM Trudeau demands a confidence vote over a proposed probe into the Liberals handling of the coronavirus pandemic. A busy day ahead for Canadian data releases with BoC CPI, Retail Sales and New Housing Price Index, also in focus will be US Stimulus and confidence vote updates. Support 1.3045, with resistance at 1.3140, if breached look for quick rebound to 1.3220. 

Euro strengthens on positive market sentiment and a weaker US$. US Stimulus remains the primary focus, while investors are shrugging off the surging covid-19 cases across the EU. Eurozone growth concerns remains a primary focus for the ECB as inflation begins to fall into negative territory. The ECB’s message is turning increasingly more bearish and will likely put more pressure on the central bank to do more. Support at 1.1750, with resistance at 1.1900.

GBP rallies as the Brexit pendulum swings back to optimism again. Comments from the EU chief negotiator saying today that a new trade deal with Britain was “within reach”. Optimistic Brexit news coupled with a weaker US$ helped the GBP hit rally towards a 1-week high. In the short-term investors are ignoring the surge in Covid-19 and the increasing lockdown measures. Intraday US stimulus and Brexit updates will be the primary drivers for GBP. Support 1.2820 with resistance holding at 1.3080.