The global “risk-off” mood continues with stalled US fiscal stimulus, paused vaccine trials and the rising Sino/US tensions. US fiscal stimulus appears to have taken a step backwards as Reps lowered the amount of proposed stimulus to US$500-700 bln with Dems responding its “an insult to Americans intelligence”. AstraZeneca paused its phase 3 covid-19 Vaccine trials, the immunization project is considered one of the most advanced that is in the final testing phase. Sino tensions are rising with reports of intellectual property and human rights abuses and “decoupling” statements being focus points in the US elections. CNY and Asian Currencies had weakened yesterday, but are stable at the N.American open. Trade related currencies remain under pressure with AUD & NZD down ¼% vs US$, NOK & MXN are down about 0.1%, whilst ZAR rallied 0.6% vs US$ despite weak GDP data. No key US$ data today, the markets will focus on US Stimulus updates and election rhetoric for direction.
Oil prices rebound from yesterday’s lows, but demand concerns persist, and analysts expect further price weakness as global coronavirus cases are expected to rise. C$ fell almost 1% yesterday to 2-week lows as oil prices slipped almost 8% on Tuesday. BoC (10am est) is expected to keep rates on hold and will likely stick to “a long and difficult” recovery narrative. In July the BoC Governor pledged to keep interest rates at ¼% for at least 2 years and he will likely reiterate this in today’s meeting. The BoC statement and Oil prices will dictate C$ direction intraday. Support at 1.3185, with resistance at 1.3270 if breached 1.3345 (12th Aug) next.
Euro edges lower, down slightly on the day and down 1.4% in September as the risk off mood returns. The halt in the vaccine trail alongside rising European coronavirus cases and uncertainty ahead of tomorrow’s ECB meeting, is putting additional pressure on the Euro. The ECB is expected to leave rates unchanged but will publish new forecasts for growth and inflation. Rising coronavirus cases in Spain and France will cast doubt for EU’s economic recovery in 2020. Minor support at 1.1745, if breached look for 1.1675 next, with resistance at 1.1850.
GBP extends its losses (down 3% in September) amid Brexit deadlock, fresh coronavirus restrictions and a strengthening US$. GBP’s recent strength was primarily attributed to the weakness of the US$, ignoring significant UK domestic concerns. The rebound in US$ has seen the markets refocus on the stalled Brexit talks and the government admitted the new Brexit legislation would break international laws. The likelihood of a Brexit solution at this point looks remote ahead of the UK’s October 15th deadline for a trade deal. Rising covid-19 cases has prompted the government to limit gatherings to just 6 people and set nighttime curfews in specific high infection locations. Support 1.2910, if breached 1.2780 next with resistance at 1.3000.