US Dollar recovery theme continues, US earnings mostly inspire

Intermediate

Macroeconomic/ geopolitical developments

  • President Joe Biden’s inauguration passed without any notable incident, which was likely a relief for financial markets.
  • Four central banks were in play last week, with modest signals from the Bank of Canada and the European Central Bank of less dovish, de facto minimally more hawkish tones.
  • Earnings season played a significant role, with most banks and financials beating expectations, whilst Netflix was extremely upbeat, sending tech stocks significantly higher.
  • Slight disappointment from Intel and IBM at the end of the week, however, saw US tech setback.
  • The Markit Flash Purchasing Managers Index data for the major economic nations for January were released Friday and were broadly worse than expectations.
  • The Democrats in the House of Representatives have stated they will send articles of impeachment to the Senate on Monday.
  • This will see Trump’s second impeachment trial start this week, charged with “incitement of insurrection” over the storming of the US Capitol.
  • In Europe, the political fallout in both The Netherlands and Italy, remain negatives for the wider economic area.
  • Lockdown measures through Europe are becoming more aggressive, with travel restrictions being toughened.
  • This is in response to the spread of new variants of COVID-19, as cases, hospitalisations and deaths continue to rise.
  • In the UK, the vaccine program is seeing success, with further measures being implemented to ensure a rapid vaccination of the more at-risk population.
USDJPY Chart

Global financial market developments

  • The major European equity indices broadly marked time, whilst US averages did hit record highs.
  • The US Dollar has reinforced its rebound from its 2020 weak position.
  • The US currency has been resilient against most of the major currencies, notably versus the Japanese Yen and the “risk currencies” the Australian, New Zealand and Canadian Dollars.
  • But, the Pound stays particularly strong with GBPUSD moving to another new multi-year high.
  • In the commodity space, Oil saw a modest setback on Friday, but remains close to the multi-month high.
  • Copper is still in a consolidation theme since early January strength.
  • Gold remains vulnerable since the earlier January plunge lower.

Key this week

  • Geopolitics:
    • Political events will be closely monitored in the US with Trump’s second impeachment trial likely to begin on 8th February.
    • Also watching for further executive orders from President Biden.
  • Monitoring new lockdown measures, in the US and Europe.
  • New COVID-19 cases, hospitalisations and deaths stay in the spotlight inter US and Europe.
    • Markets will monitor further vaccine delivery announcements and approvals.
  • Central Bank Watch: Tuesday brings the Bank of Japan (BoJ) Meeting minutes and Wednesday sees Federal Reserve Open Market Committee (FOMC) rate decision, Statement and Press Conference
  • Macroeconomic data: Standout data being the German IFO Business Climate, CPI and Employment report, the U.K. Employment report, US Durable goods and GDP.
  • Microeconomic data: US earnings season continues, with standouts this week being; Microsoft, Johnson & Johnson, Verizon, Texas Instruments, Starbucks, Apple, Tesla, Facebook, Boeing, Visa, MasterCard, Chevron, and Caterpillar.
DateKey Macroeconomic Events
25/01/21German IFO Business Climate
26/01/21BoJ Meeting minutes; U.K. Employment report
27/01/21Australian CPI; US Durable goods; FOMC rate decision, Statement and Press Conference
28/01/21German CPI; US GDP and weekly Jobless Claims
29/01/21Japan CPI and Employment report; German Employment report; Canadian GDP; US Personal Consumption Expenditure, Income and Spending

Editor in chief

Steve Miley is the Market Chartist and has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

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