Wednesday September 23rd, 2020

Currency markets remain under pressure, testing multi-week lows as risk aversion sentiment prevails. Sino/US tensions continue with The China Daily newspaper article today saying China has no reason to approve the “dirty and unfair” deal based on “bullying and extortion” talking about the DyteDance (TikTok) proposed deal. Rising coronavirus cases and fresh restrictions continue to put pressure on the EU economy. Euro zone business growth stalled in September adding concerns for the EU economic recovery with the prospect of a second wave. AUD hit 6-week lows (-0.6%) amid speculation of further monetary policy easing. ZAR extends its sell off down 1% on concerns about bailing out the state airline and renewed safe haven US$ demand. Asian currencies are down about ¼% on average, while NOK fell 0.6%, NZD down 0.7%, MXN down 1.15% vs US$. Markets will remain focused on the Fed Chairs testimony as well as US Housing Price Index, Manufacturing PMI and Service PMI data releases this morning.

Oil prices remain stable with the gulf coast storms and falling US fuel inventories offsetting the impact of lower coronavirus related oil demand as well as Libyan oil coming back online. C$ tested 1.3345 Tuesday but managed to rebound slightly on firmer oil prices. PM Trudeau will addresses the nation at 6.30pm ET after the throne speech which will lay out the government’s plan to tackle the pandemic and the economic recovery. Bias remains to buy US$ on any dips. Support at 1.3270 and resistance holding at 1.3350, if breached look for 1.3420

Euro slips to two-month lows on a stronger US$, rising European coronavirus cases, mixed PMI data and ECB comments about rate monitoring. French business activity has slowed to 4-month lows, German private sector recovery is weaker than expected. The surge in coronavirus cases across Europe and potential greater covid-restrictions will likely put more pressure on Euro. Positive tones from the EU Brexit negotiator suggests a deal may be possible. European equity markets are rebounding today and will likely provide some support to the Euro. Eyes will be on US data and Fed Chair testimony for direction. Support at 1.1670 and resistance at 1.1785.

GBP bounces off eight-week lows after positive Brexit comments. GBP initially weakened after the UK PM announced new rules and restrictions to help fight the current surge of coronavirus cases. GBP rebounded when the EU’s chief negotiated said that “we remain determined to strike a Brexit deal. Formal Brexit talks continue in London until Friday, failure to produce results will put renewed pressure on GBP. Support now sits at 1.2675 with resistance at 1.2800.