US Dollar Firms, Market Sentiment Sours, Oil Prices Dragged Down - US Market Open
- Risk Sentiment Sours on Virus Concerns
- USD Firms
- Oil Prices Dragged Down
QUICK TAKE: Risk Sentiment Soars, USD Firms, Oil Prices Drop
Equities: Markets are on the defensive to close the week amid renewed COVID concerns. A UK government source hinted a possible two-phase unlocking plan whereby a national lockdown would be stretched out before moving the entire country into tier 2 lockdown. Elsewhere, EU’s Von Der Leyen has suggested targeted measures are needed. In turn, this has spilt over into US futures, which are modestly lower ahead of the final Wall Street open of the week.
Euro Stoxx 50 Sector Breakdown
Outperformers: Consumer Staples (0.8%), Healthcare (0.1%), Consumer Discretionary (-0.2%)Laggards: Energy (-3.0%), Basic Materials (-1.8%), Financials (-1.8%)
ITALY UPDATE: Italian political risks are on the rise yet again following local press reports that Italian PM Conte is reportedly considering the possibility of elections. Subsequently, Bund/BTP spreads have widened while the FTSE MIB underperforms. That said, an election does still seem unlikely, however, a move in this direction could cap upside in the Euro in the short-run with bearish EUR/JPY the best expression.
Intra-Day FX Performance:
FX: The Euro and CHF have managed to remain firm, despite the greenback edging higher. Cross-related buying in EUR/GBP has underpinned the Euro after weak UK PMI data weighed on the Pound. That said, the bias for EUR/GBP remains a fade on rallies with the vaccine rollout program a bigger success in the UK relative to the EU thus far. Elsewhere, the soft risk tone has seen high-beta FX (AUD, NZD, CAD) naturally lower across the board. However, higher than expected NZ CPI has helped push AUD/NZD towards the mid 1.07s.
Chart to the Watch:AUD/NZD Trading at Rich Levels Relative to Yield Spreads
Commodities: With the threat of further lockdown measures globally, oil prices have pulled back from its recent highs with Brent crude futures at weekly lows. Gold prices have dropped back to its range low as the USD perks up.
Looking ahead: Little is left on the docket with US Markit PMI figures the notable data point.
REPORTS OF NOTE
- “USD/CAD Technical Overview: Trend is Down, but Bullish Pattern May Emerge” by Paul Robinson, Strategist
- “Australian Dollar Forecast: Key AUD/USD, AUD/NZD Levels to Watch?” by Justin McQueen, Market Analyst
- “Bitcoin (BTC) Price Outlook - Trying to Stem Recent Heavy Losses”by Nick Cawley, Strategist
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