Euro Awaits Draghi Vote, Mexican Peso Eyes Close Call Rate Decision - US Market Open
- Subdued Session with Markets Grinding Higher
- Euro Awaits Draghi Vote
- Mexican Peso Eyes Rate Decision
QUICK TAKE: Euro Awaits Draghi Vote, Mexican Peso Eyes Close Call Rate Decision
Equities: With market holiday closures across most of Asia for the Lunar New Year, it appears that the lighter volumes has also been reflected in European markets, which has been eerily quiet. That said, modest gains across the board for EU bourses, which in turn sees US futures marginally higher. Yesterday’s dip in US markets had been quickly faded with Chair Powell also adding some words of encouragement that the Fed are not looking to take the foot off the stimulus gas anytime soon. Today’s softer initial jobless claims data also did little to dent risk sentiment, perhaps on the view that bad news once again good news (i.e. more stimulus for longer).
Euro Stoxx 50 Sector Breakdown
Outperformers: IT (1.3%), Utilities (0.9%), Industrials (0.6%)
Laggards: Energy (-1.0%), Healthcare (-0.5%), Financials (0.1%),
Intra-day FX Performance
FX: As markets are devoid of any notable catalysts, FX has been rather subdued, with the exception of the Australian Dollar. The USD remains soft with upside hard to come by, for now, risks remain tilted to a grind lower. Elsewhere, the Japanese Yen is trading on the weak side with cross-JPY at intra-day highs as risk sentiment continues to track higher. Perhaps what will garner FX markets attention is in the EM space with the Banxico rate decision due. The expectation is split 50/50 for a hold or 25bps cut, the last meeting showed a 3-2 decision in favour of a hold. However, with one of the hawkish members being replaced, risks have shifted towards a cut. That said, MXN vols have picked up ahead of the meeting.
Commodities: A modest reprieve in gold as the markets 2021 consensus trade of USD selling is back. Subsequently, the time spent below 1800 had been brief for gold prices. That said, we are once again back to familiar resistance around the 1840-60 area, in which a break below 90 in the greenback coupled with US rates pulling back, will be needed to reclaim 1875 and 1900 above. But for now, I will be placing a close eye on the RSI as to whether this recent momentum can persist to the upside, which as it stands, is somewhat struggling to move above 50. On the downside, support is situated at 1810-15. However, given that the USD remains soft and real yields are sub -1%, the environment is supportive of gold prices.
Looking ahead: Little on the economic calendar, however, for Euro watchers. The 5-Star Party will cast their vote over support for Mario Draghi, which is set to be finalised by 1700GMT. As it stands, Draghi is expected to become the next Italian PM with the 5-Star Leader urging his party to back him.
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