Wednesday September 15th, 2021

The US$ dips, oil continue to rise, equity markets are weaker while US yields are unchanged. Markets start the trading session on a cautious note after Chinese retails sales grew at just 2.5% in August vs expectations of 7% as the country deals with its worst outbreak of covid since early 2020. Currency markets weakened from their highs on safe-haven US$ buying after the disappointing Chinese growth results and also uncertainty about the Fed policy is weighing on “risk-on” sentiment.  In other news, UK inflation surges to 3.2% as food and transportation costs rise post Brexit. US President Biden denies China turned down his offer for a face-to-face meeting. COVID, Pfizer to apply for US vaccine approval for younger children as young as six months old in November. The UK sets out pandemic plan for the fall and winter, booster shots for over 50’s to begin next week. Germany has begun a vaccination “action week” as it seeks to reverse a slowdown in its vaccination drive. In currency markets, CNY trades higher up 0.15%, while other Asia currencies are up 0.10%. AUD (off a 2 weeks low) & NZD up 0.15% and ZAR up 0.5% expect to see some market consolidation with no key data releases today as markets wait for US Retail sales and Initial Jobless claims tomorrow

Oil prices continue their march higher after industry data showed a larger than expected drawdown in U.S. crude inventories and on expectations demand will rise as vaccination rollouts widen. C$ strengthens in early trading as oil prices extend gains and investors look to Cad inflation numbers next. The Canadian CPI is out this morning with expectation of a y/y July increase of 3.7%. The upcoming elections uncertainty remains a key reason why investors are staying nimble. Support remains at 1.2625, while resistance holds at 1.2720.

Euro bounces off the 1.1800 level after the USD lower than expected CPI figures. ECB’S dovish “recalibration” in the rear-view mirror, market’s attention now focused on inflation, Delta variant and Fed’s taper. In the old continent, there are reasons to be optimistic – at least according to European Central Bank President Christine Lagarde, who said that she foresees a return to pre-pandemic output levels sooner than later. Moreover, European COVID-19 cases are falling while vaccinations are rising – having an advantage over the US. Support resets to 1.1760, while resistance holds at 1.1840.

This morning UK CPI figures helped the EURGBP break through the 0.8550 level. Expect some consolidation as markets will focus on tomorrow’s US economic figures. Support holds at .8500 (1.1765) while resistance resets to .8600 (1.1628) if breached look to .8650 (1.1560).

GBP/USD rises above 1.38 after UK CPI beats estimates. Based on inflation figures alone, GBP/USD has room to rise. Other contributors such as Brexit issues, uncertainty about US infrastructure spending, and covid, where Britain has fewer cases on a per population basis than the US are pointing in the same direction. Support holds at 1.3785 and while resistance resets at 1.3900.