Equity and Commodity markets remain positive, US$ rebounds, while Australian and EU economic data disappoints. US$ Index rebounds 0.5% mtd after Tuesday’s positive manufacturing data and a growing anticipation that the US Senate may resume stimulus talks. AUD weakened (-0.5% mtd) after its GDP data confirmed Australia has entered into a recession for the first time in almost 30 years. CNY slipped (0.4% mtd) from its 16-month highs after the “guided” rate was set slightly weaker expected, raising speculation that officials may want to slow CNY rapid gains. ZAR fell almost 1% today on profit taking, alongside a resurface of domestic political risks. Asian currencies & Petro currencies remain flat, while European, JPY & MXN currencies are down 0.25% vs US$ on average. Intraday focus shifts to US ADP employment change, US Factory orders and NYK Fed Williams speech.
Oil prices remain steady as API reports a larger than expected drop in US Crude stocks. Longer term demand requirements remain cautious as concerns of a 2nd wave of covid cases keep investors cautious. C$ failed to extend beyond its 8-month highs as US$ rebounded on better than expected US manufacturing data. No key Canadian data until Friday’s Employment released. Positive US data is good for Oil and likely keep C$ Stable. Bias to stage into buying US$ on any dips. Support remains at 1.2952 (Jan7th), if breached 1.2795 (Oct2018) next key support with initial resistance at 1.3120 (minor) and then 1.3185.
Euro drops 0.65% from Tuesday’s highs on a rallying US$, supported by positive manufacturing data and the prospect of renewed US stimulus talks. Domestic concerns about the EU’s economic recovery and a resurgence of new coronavirus cases across Europe will add pressure to EUR. August CPI fell into negative territory and todays German retail sales were weaker than expected. Analysts’ projections are for retest of 1.1650 by November. A break of 1.1850 a key pivot point, will likely see a move to 1.1725, with resistance lowering to 1.1925.
GBP withdraws from recent highs as the US$ rebounds and the stains of domestic issues are likely to impact the pound going forward. UK PM is facing criticism about his handling of the crisis and various policy U-turns related to the reopening of schools. The furlough scheme introduced to support workers unable to work is due to expire in October, with the probability it won’t be extended in its current form. The BoE Governor will address parliament today and provide an update on the UK economy. Brexit remains at a standstill and the probability of a “no-deal” Brexit is increasing. Support at 1.3265 with resistance lowering to 1.3410.