This Week In Markets: 11th - 15th January 2021

OK, very good morning to you. Hope you're doing well. It is Monday the 11th of January. Hope all your friends and family are safe and sound given everything that's going on. And a couple of things then to have a look at in this briefing, basically an update of the roundup of the weekend news. A quick look at some of the major themes to be aware of, and also what is the market sentiment here at the open this morning. Before I begin, don't forget we've had some really great exclusive content for our community on Amplify Live, so do check that out in the link below. Or if you're watching this on YouTube, don't forget to like and subscribe to the channel. It would be much appreciated. But look, let's get straight into it and look at the charts this morning and continuation of dollar strength at the moment. The DXY is trading up about 0.3%. That has weighed on both major currency pairs here in EURUSD and Cable, a little bit lower at the moment. Uh, Cable in the future is down around 135 handle, underperforming its euro counterpart slightly on the back of still a little bit of apprehension of the potential for further force coming, more stringent lockdown in the UK. Otherwise, elsewhere, stock futures moderately lower, albeit very marginally so. Nothing more, I'd say, than perhaps a little bit of profit taking given the run-up to all-time highs last week. The overnight Asia-Pacific session generally was mixed. Japan was out on a market holiday. Chinese inflation figures, CPI 0.2% year on year above the expected 0.1% on CPI, PPI -0.4%. As expected, -0.8. Not really any impact or read across into the UK European Open. Otherwise, elsewhere, the 10-year T-notes, bottom right, trading flat at the moment. So no real new definable yield movement seen as yet. Gold, a little bit of pressure seen at the recommencement of trading the overnight session, however, has just gradually recovered, running into some near-term resistance here in the futures at around 52, 1852. Being the recommencement high seen overnight and the low on Friday afternoon, but up around $9 at the moment. Again, it was beaten down significantly last week on the rising yields on the back of the blue wave, which was the most dominant theme of course. In the crude market, fairly similar price pattern in fact to what we've seen in the equity space. Not really one definable piece of news or anything new related to OPEC par se, but Bit of profit taking perhaps on the extremity of the run-up that we had last week where obviously we had surprise Saudi cut in production. Still a degree of optimism over the demand side on the rollout of the vaccines globally. And so we hit a peak on a daily here at 52.75, just backing off a little bit, but looking for some support lower down from these previous levels we can see going back to 2019 if we were to pull down to kind of 50/50, the $50 handoff area as, as being supportive going forward. The other market that has probably seen the most movement this morning is Bitcoin. Not something I typically look at, but obviously it's had such a big phenomenal run to kick off the year. I mean, if we go back to where we were on the 31st of December to the high that we saw at the end of last week, we've saw the best part of a gain of nearly 50%. But if you look at it from that point to where we are this morning, which is literally just a weekend trade, and this morning, the first couple of hours, we're already down close to 23% at the low. So I hope any new traders haven't been caught out there getting involved, given all the hysteria that Bitcoin was creating last week. Just the nature of the product, I guess, in that sense. But look, let's delve straight into some of the headlines and talk about what we've got to look out for this week. Don't forget, in terms of the technical analysis and the trade setups, the guys are going to go over that in full on the live stream on Amplify Live, so don't forget to check that out. But getting straight into some of the headlines, I'm going to start off with talking about the UK, uh, and COVID-19. And Britain is on course to have immunized its most vulnerable people against COVID-19 by mid-February. So far, around a third have been done, and they are aiming to offer a shot to every adult by the autumn, with some 2 million people having already received their first dose. That was according to Matt Hancock, the Health Secretary in the UK. So remember, mid-February was the deadline they had previously issued. Some question marks on whether or not that is going to be hit, just given the relatively slow adoption of the vaccines at the moment being administered, particularly with the likes of some of the things we were discussing last week. It's not that AstraZeneca can come in and start just offering millions upon millions, uh, vials of the vaccine. It doesn't quite work like that from a manufacturing perspective, so it's going to take some time. The speeds, it seemingly has started to pick up. The number of UK vaccination, what they're— the government are calling mega centers, is set to also pick up pace in locations like sports stadiums and conference centers across the country as of the coming weeks. That's what's in the plan and the pipeline at the moment as they look to really build out the speed of that inoculation program. So that all sounds very positive. I guess the main thing I'd look for here is really whenever we've had a government put forward a timetable for this type of thing, they've nearly always inherently missed it. They always tend to err on the side of optimism, positivity, whatever you want to call it. So there's always room then for disappointment in that regard. And already, as we were hearing last week, I don't think it would be much of a surprise at all to see the current state of the lockdown rolled out as far as even Easter, which would be the beginning of April. Remember that the government was looking to tentatively look to review the current status of the UK lockdown around mid-February, on the week of the 15th, to then make any alterations on the week of the 22nd, but I'd say that's probably a little early at this point, all things remaining equal, and particularly when we start to, as we can see on this graphic, look at some of the actual COVID-19 case rates, hospitalisations, and death counts. I would say it's more like that's going to be rolled over. Secondly to that as well, I'm sure you saw lots of shots in national press over the weekend about just the public's lack of adherence on quite a large scale to the current state of the lockdown. And what that's leading to then is a lot of difficulty, given mobility rates are generally quite a bit higher than comparative to the lockdown that we saw in March, which obviously was fairly effective on getting on top of the virus at the time. This time round, a more lack of adherence to the, the stringency of those rules in combination with a more transmissible virus and this new variant of the, of COVID-19 has meant that there's some talk now starting to emerge that the government could take more strict measures with this lockdown. There was a meeting apparently between UK Prime Minister Boris Johnson last night. However, the latest there that I've heard from government insiders have insisted that the immediate priority is to enforce the existing rules. A lot of that rationale being based upon there hasn't been enough time yet to see whether this latest lockdown in its current form has paid dividend or not, and therefore does it need alteration. But that's definitely something which could have some ramification. Obviously Brexit has been a little bit of a side issue, the COVID-19, the virus itself, and also then the subsequent lockdowns still the major thing here which is influencing kind of global assets, but particularly in the UK. It's very acute at this point of time, just given the fact that this number here, the COVID cases and deaths, is generally underreported at the weekend. So today's number could be definitely one to account for. And you probably read at the weekend as well, a lot of the NHS trusts, particularly in London— I think it was 16 out of 21 of them— over basically breaching their safety thresholds, which is around 92% of capacity. And so a lot of these things obviously very troubling. And again, the, the read across for Sterling here at the moment, I would say, is in the coming days, if these numbers continue to get higher and quite drastically so, and the public continue to show a general on average a lack of respect for adhering to these rules, then it's almost inevitable that two things— the lockdown is going to get more strict and it's going to go on for longer. And that is going to have some economic impacts over the medium term. Medium term in my world, I'd say the coming weeks, and therefore probably needs to be reflected in the price of sterling. Particularly as well, don't forget with cable, it's been relatively high of course with the fairly smooth Brexit situation And so there's room for some downside, particularly in the context not only those negative developing fundamentals for the pound, but in the context of a resurgent dollar, at least in the short term, on the back of repositioning for the somewhat surprise of the blue wave from last week. So that's the latest there. Talking about Trump, so there's been a lot of headline news, of course, given that pretty shocking episode that happened on Capitol Hill last week. Democrats will launch a second attempt to remove Donald Trump from office today. They will introduce articles of impeachment to the House. The Senate will not reconvene until the 19th of this month, so still some time. Senate Republican leader though, Mitch McConnell, already said on Friday, to give you some context, that a trial cannot begin before then unless all 100 senators consent to it, which is an exceedingly unlikely development as Trump obviously still has a number of— despite all that's gone on, all the criticism he's faced, he still has some supporters within the Republican Party. Separate to that, a growing number of Republicans over the weekend, particularly on Sunday, have criticized the president for his role, but none of them have said that they would vote to convict him of wrongdoing in the Senate. So my overall take here with this whole impeachment thing, invoking the 25th Amendment and so on, I think it's all just quite frankly noise. Again, with the greatest kind of sympathy and sensitivity to the event and the people's lives who were impacted last week and what that means for democracy and so on. That aside, as far as markets are concerned, I think impeachment is not going to happen. Even if it does get brought about, it's not going to go through. We've been here before, and so it's all a bit of a distraction, and one I'd probably say is one to be ignored, at least for the time being, all things being equal. Reports have suggested though that obviously time is ticking now, and Trump and his dwindling circle of advisors, they are believed to be planning a defiant final week in office, according to people close to the matter. Trump is believed to be preparing at least one more round of pardons and also could try a final time to advance his administration's efforts against Big Tech. Obviously, probably somewhat now even more motivated to do so given his censorship silencing he's had from the likes of Twitter. And Facebook in particular. What does this all mean for markets? I mean, I've made a note here to myself that I don't think a great deal from, from a trading perspective, but politically I think it is very meaningful. Between an impeachment movement and, as I said, Trump censorship by social media, I think political polarization is not going away anytime soon. Neither is Donald Trump going away anytime soon. That's even despite the blue wave that's happened at the moment. So yeah, a lot of— it's an interesting time in US politics. A lot of challenges being met, and there's a lot of social division at the moment. I don't think any of these kind of topics are going to go away. From a market's perspective, I would say there's other things much more important right now, like COVID-19. to, to be confronted with. The other thing we're looking out for this week then, and this moves on, uh, to the other big thing aside from COVID vaccines, which is Biden's stimulus plan. Obviously the blue wave now with the Democrats having full control of both chambers of Congress is, is going to be influential, uh, and President-elect Biden is due to outline his stimulus plans on Thursday. Biden has guided that the price tag will be high and in the trillions, and is expected to include plans for $2,000 stimulus checks, some more generous unemployment assistance, and enhanced aid to city and state government. So again, this is what— why the market was behaving in the way that it did last week, with equities all-time highs, with yields breaching the 10% in the 10-year, gold coming under pressure. There's a lot of prepositioning for this, so seeing the details around it is going to be particularly interesting to see. That's going to come on Thursday. Otherwise, let's just take a look at the calendar for this week. And kicking off today, it's a fairly quiet day. There are a couple of speakers that definitely warrant monitoring. The bolded one here, you can see ECB President Christine Lagarde moderates a panel later today. That's going to be a 2:40, excuse me, London time. Worth noting that this is Lagarde's first public appearance since the new year, 2021. She speaks both today and Wednesday and may provide some clues then for implications for monetary policy given the current state at the moment of the European economy, developments on COVID that we've had, given there's been a relative silence from them for a few weeks over the Christmas, New Year period. This then will be accompanied by the ECB minutes, which we're going to get on Thursday. Separate to that, one thing to be aware of is that Jerome Powell is also speaking this week, and he's speaking on Thursday, and he's taking part in the Princeton Economics webinar. So not expecting too much there, but just wanted to bring it to your attention that the used to be president and the Fed chair, will be speaking this week. So Monday, Wednesday, and Thursday. Otherwise, looking further forward, Tuesday's economic data slate, yeah, relatively quiet, not really too much to speak of. So then we go into Wednesday when we do get the US CPI. So from a data perspective, you do have US CPI on Wednesday, and you've also got US retail sales on on Friday. Now, weekly jobless claims as well will be another one to be monitored, just given the impact that further restrictions in the US are having given the situation of COVID Retail sales probably fell for a third straight month is what analysts are expecting. The auto and gasoline components likely rose, but spending in bars, restaurants probably plunged, as you would imagine given the renewed COVID-19 restrictions. Inflation— so the figure we're going to see on, on Wednesday from the US is likely to move higher on gasoline prices, but outside of that, price pressures, as you can imagine, remain relatively benign at the moment in the US, again with consumer confidence generally decreasing and with the overall state of the economic environment and activity at this present point in time. One other thing you might have mentioned here, or you might have seen here on this calendar, is there's quite a few Bank of England speakers. You've got Tenreyro speaking, and quite interestingly, on the topic of negative rates. Remember last week, just given some of the developments that we saw with COVID-19, that the money markets have been bringing forward the pricing in of the potential for negative rates further into near term to August, in the summer of this year. And Temerayo, what can we expect today? She's speaking at 2 PM London time. I don't think a great deal. She's been an advocate of it, on the relative success as she sees it that it's had in the likes of Japan and the ECB. Personally, I think she's just being used as a bit of a pawn by the MPC to just plant the seed of the idea that the Bank of England will willing to seriously entertain it as a tool rather than anything more than that, is my, my kind of view. So I expect her to be fairly similar to what she said before. Then you've got Bank of England's Broadbent gives a speech on COVID and composition spending. Broadbent is the Deputy Governor of the Bank of England, so I wouldn't expect him to deviate too far from the general party line at this point in time. But probably both could be quite interesting to to watch going, going forward. General consensus here is that as much as negative interest rates, given the situation is quite challenging at the moment in the UK due to COVID-19, and obviously a lot of it will be hinged on the effectiveness of the rollout program of the vaccine, but there's a stepstone approach to monetary policy. Don't forget yet. And so things like more incentives for banks to lend under the term funding scheme, a faster pace of bond buying under the QE, the asset purchase program, are all probably steps to take before then adopting that of negative rates. So that's just giving you a bit of context as to, as to things. So that is pretty much it. That is the week as a whole. So Overall, it is fairly quiet in terms of a number of major economic data points, certainly not as busy as last week. The main thing is probably US CPI Wednesday, jobless claims Thursday, retail sales Friday, number of central bank speakers throughout the week, including then, as I said, Lagarde and Powell. And then, then the other big thing Of course, that continues to be a dominant effect is COVID-19. The situation in the US, mainland Europe, and the UK needs to be monitored. Any talk about rolling out or more stringent lockdowns could be impactful. Of course, looking out for any updates on the vaccine, with the tail risk being disruptions to manufacturing distribution, which might have a negative effect. And then looking out for Joe Biden at the end of the week to roll out the details of what he intends to do now with his blue control, with the latest stimulus measures when he comes into power in just over a week or so's time. That is it. So, gonna leave it at that, let you guys get on and have a good day and week ahead. Thanks very much.