Stalling Stock Market Rally And Rising COVID Caseloads Make For Bad Bedfellows

Over the past 24 hours, price action has started to show signs of a little vaccine exuberance exhaustion. Perhaps we shift to consolidation in the near term awaiting the efficacy results of the next vaccine candidate. 

But until we have clarity over the rates and inflation outlook, key mobility impacted sectors such as Leisure, Construction and Energy could continue to recover. Still, the case for the entire Value universe is much less clear. 

In a similar vein

GBPUSD Price Action Showing Signs Of Exhaustion

GBP/USD price action over the past 24 hours has started to show signs of a little exhaustion, and perhaps the pair is due for a bit of consolidation in the near term.

USD demand seemed to reemerge into the latter stages yesterday, and momentum in the latest risk rally has also slowed.

AUD also in consolidation mode 

AUD/USD continues to consolidate following recent gains, as some of the exuberance following the positive covid vaccine news earlier in the week abates. Equities drifted off a bit during the Asia session, and USD demand on dips has emerged. Continued AUD/NZD-related supply following the RBNZ decision yesterday has perhaps also added some weight. AUD/USD gains have been relatively short-lived today. The pair failed to probe above 0.7300, and there has been a slightly more offered tone as the day has progressed. 

NZD trickling lower

After shifting gears from overpricing the probability of a 25bp rate cut to now worrying about the New Zealand debt load, the Kiwi trickled lower. Keeping in mind the average attention span for FX traders is around 48-72 hard to stick to one narrative.

Lots of questions on the INR today

The RBI has been accumulating US dollars to weaken the rupee, partly because it aims to orient the economy toward the export sector. The rupee is, however, historically weak on a NEER basis now. Inflation concerns should dominate, with consensus expecting September data at 7.3% y/y later today. With demand returning in the real economy, CPI inflation should remain elevated, as supply may be slower to catch-up. It's a matter of time before  USD/INR downside to help cap inflation.

Oil 

OPEC backstops are a reason to cut shorts not chase the market higher with both COVID in the air and production hedgers selling into rallies 

The DOE number might help support but my feeling is that the vaccine binge is losing steam given the prompt deliverable nature of oil contacts. Prices are vulnerable to setbacks as we have seen today after the Tokyo COVID surge headline