Global market watch - 22nd January 2021

With event risk now out of the way, the market is looking to sell US dollars at the moment. One of the benefactors of this is sterling as the UK continues to vaccinate its population. It’s not all good news, however, as the Prime Minister suggested yesterday that the lockdown could last until the summer. On the economic front, we have just had the release of December’s retail sales, which came in below estimates, rising 0.4% rather than the 1% expected. The PSNB figure was GBP 33.4 billion and larger than the GBP 31.5 billion suggested. This has seen the pound dip slightly in early trading. Later this morning we have first reading Services and Manufacturing PMI for release.

The ECB kept monetary conditions unchanged with President Lagarde talking about very low inflation. She continued that regarding stimulus and monetary policy ‘nothing was off the table.’ Specifically, on FX she said the euro appreciation is a drag on inflation and reiterated that the ECB was ‘closely monitoring’ the level of the euro. Her last two comments produced slight weakness in the euro.

The dollar is weakening at the moment, as the market looks forward to the President’s $1.9 trillion support package being passed. However, it may be prudent to keep in mind that quite often the dollar strengthens after inauguration, as the market realises that all the promises a President makes will not be kept. Certainly, there could be a logic in suggesting that as December saw a $900 billion support package passed by Congress, does the economy really need such a huge sum again to be injected? Last week’s jobless claims were 900k, still a very high number, which suggests that the economy does need support. Today we have manufacturing PMI for release.
Technically speaking, the AUD is gainfully trying to take advantage of USD weakness, but is looking like a train at the top of a hill and running out of steam. If close by resistance levels above 0.7800 are exceeded, it could be a green light for more gains, but the picture isn’t clear at the moment.

Mon Tue Wed Thu Fri Sat Sun
1 2 3
45678 9 10
1112131415 16 17
1819202122 23 24
25 26 27 28 29 30 31