Wednesday September 1st, 2021

The US$ is flat, oil prices hold, equity markets and US yields firm ahead of employment and manufacturing data today. ADP, America’s largest payroll company estimates a jump from 330k to 613k in private sector jobs, and could be a seen as an indicator for Friday’s key NDP. The US ISM Manufacturing PMI is expected to show a small decline from 59.5 to 58.6. The US$ holds steady after firming on month-end demand, but any deviation from today data releases could increase US$ volatility. In other news, OPEC is sticking to its policy despite higher oil demand. China’s factory activity drops for the first time since April 2020. US regulators rejects Canadian National’s proposed acquisition of Kansas City Southern. Covid, the US has administered almost 1 million covid booster shots, while the CDC warns unvaccinated people not to travel over the Labor Day weekend. Indonesia & Thailand start to ease covid curbs as case numbers fall. In currency markets, the US$ remains firm after strengthening on month-demand but is vulnerable to increased volatility if we have any surprises in today’s data releases. CNY dips 0.1% on weak factory activity while Asian Currencies are down 0.3% on average vs US$. Trading Currencies are mixed with JPY down 0.25%, while NZD & NOK are flat, MXN up 0.15%, AUD firm 0.35%, ZAR rallies 0.5% vs US$. Intraday US Jobs and Manufacturing PMI will provide intraday direction. 

Oil prices rose in early trading ahead of the of OPEC+ policy meeting. OPEC agreed to keep its policy of gradual oil output increases in place despite revising up its 2022 demand output and President Biden’s warning the policy could threat global economic recovery. C$ holds within its current range as it balances the surprise Q2 contraction in Canada’s economy, uncertain oil prices and US$ holding near 3-week lows. The weak GDP data will unlikely impact the BoC at next week’s meeting, but a weak result in CAD’s Manufacturing PMI today could put some extra pressure on the loonie today. Support holds to 1.2548, if breached look for a test of 1.2508 next, while resistance remains at 1.2650.

Euro consolidates holding above 1.18 vs US$. Euro is finding support as market sentiment turns positive after the EZ CPI 3% y/y which increased expectations that the ECB will shift to a more hawkish tone at its next meeting. Domestically EZ unemployment remained steady at 7.6% while the EZ Manufacturing PMI slipped below expectations. In Germany Retail Sales slipped from 4.5% to -5.1% below expectations and Germany’s Manufacturing PMI also missed expectations. Expect Euro to hold within its current range. Support remains at 1.1760, while resistance holds at 1.1865.

EURGBP edges higher boosted by positive EU domestic data but remains below the key .8600 resistance level. Support resets to .8426 (1.1868) Feb 2020, if breached look for .8274 (1.2086) Dec 2019, while resistance holds at .8600 (1.1628).

GBP remains under pressure but finds support from upbeat UK PMI data. The pound remains under pressure from expected Brexit tension over the NI protocol, staffing shortages and rising inflation concerns. On a positive note, the UK Manufacturing PMI beat expectations in August as strong demand and increasing employment outweighed the ongoing supply issues. US data results will drive markets today, but in the short term the pound remains vulnerable to further weakness. Support holds at 1.3700 and while resistance remains at 1.3815.