This Week In Markets: 22nd - 26th March 2021

Okay, very good morning to you. Hope you had a great weekend. It is Monday the 22nd of March. I'm going to do the usual look ahead for the week and what's in store, but before I do, if you are watching this on YouTube, don't forget to like and subscribe to the channel. I'd really appreciate it. Um, there was a new video I put out at the weekend which was a recording of the private session that we did for our Amplify Live community over the FOMC last week, but you can find it down here on the Amplify Live videos. Uh, good, um, kind of talk through from me and one of the senior traders, Tim Duggan, about kind of preparation and then execution around a major news-driven event. So do check that out if you have time. Otherwise, look, let's get straight into it and start talking about what's going on this morning. And a lot of weekend press dominated by the kind of vaccine war situation between that of the UK and the EU. But there is some other updates for me to talk to you about, in particular about a variant that's been— some commentary from the former FDA commissioner at the weekend over the New York variant of the virus. And then things to look out for really this week. We've got quite a few things on the calendar from the various global flash PMI data points to the jobs data, CPI, retail sales coming out of the UK. We've also got Powell and Yellen in a joint congressional session as well this week. And then we're looking out for the first real evidence as well following that significant pace comment from ECB's Christine Lagarde. And what does that PEP regular update figure, which we'll get later on this afternoon, look like as well from the ECB? So quite a few things in store. And starting off here with some of the charts, and the dollar index is up marginally this morning, up around 0.2%. —so is weighing on the major pairs, I would say, to an equal degree, both down 30 pips at the moment this morning. But just keeping an eye on euro, it's just having a test down at around a strategically technical point of interest, which is around this S1 in the futures, which was then the overnight Asia-Pac high, the reopening gap down that we had. Don't forget as well that in Europe, as I'll discuss in a moment, the COVID case situation continues to worsen. That is resulting in rollouts of lockdown in the likes of Germany, most likely Ireland. We've also already seen that in France and Italy last week, and that economically is also going to have further impacts, particularly as well compounded by the fact that if this vaccine confrontation between the EU and the UK continues, then all the more pressure it's like to put on the EU in particular given their current status with the state of rollout at the moment with the vaccine. So keeping an eye here, this lower bound level that was support area back on the 10th of the month, and we had a retest of that on Friday session and in the overnight session, which was the S1 just below there. Any break of that be looking down to the next areas, to the lows that we had on the morning of the 9th, would be quite a bit further down at 1,1877.5 there in the euro pair. Otherwise then, a bit of Dixie strength is resulting in a bit of downside pressure in the commodity space. Gold just reversing course from some of the elevated moves seen towards the end of last week, so down $12, having broken through the low that we had in the overnight Asia-Pac session to trade down to the lows from overnight Thursday going into Friday of last week, which was around $1,727. Just seeing a bit of response and support there on that initial dip as Europe have come in. And then elsewhere in the equity markets, we were initially positive a little bit in the overnight Asia-Pac session for US futures. However, we have pared a little bit. The NASDAQ just running into some shorter-term resistance here around the R1, and you can see here from last Wednesday's low and the breakdown of that price we saw late on Thursday coming up on the retest, just, just fading a little bit here as we get underway in the European session. DAX already down about 65, and also worth just keeping an eye on the retest down at Friday's low, which again was the overnight low in the futures market. That kind of mild moderate risk-off tone being observed then and supporting fixed income futures, which if anything comes a little bit of a relief from the pressured price that we had with yields rising towards the end of last week. So the US 10-year is just coming up to strategically an area of interesting resistance here. This again dates back to going back to the 5th of the month, which was a key area of support for price before the eventual breakdown that we had kind of middle, latter of last week, post-Fed, after initial knee-jerk kind of dovish relief, then the ensuing move that happened thereafter. And so pretty decent bounce here in yields at the moment. Um, with, as I said, some of the general, uh, soft risk-off tone being observed this morning. All right, well, let's get into the headlines. Let's talk about a couple, a couple of different stories. And I'm going to kick things off looking at this. So the European Union will review all requests to export AstraZeneca's vaccine to the UK very severely and will probably reject them until the drugmaker fulfills its delivery obligations. According to the— to the block, according to a senior EU official. So this is kind of the next evolution of what we thought was a fail, a fairly kind of taming of the breakout that was happening between these two nations over this subject matter, given the fact that the EMA came out last week and basically said the benefits outweigh the risks. And that brought a lot of European major nations back to the table to start using the AstraZeneca drug. But it's almost flipped again in a more negative fashion with this latest headline that the EU is set to block exports of AstraZeneca vaccine and ingredients to the UK. Now there's a few things to be aware of here. Um, separately, over the weekend Pfizer has urged the EU to back down from its threat to block vaccine exports to the UK. This is a very important point because it claims Britain could hit back by impounding crucial UK-manufactured ingredients. For vaccines produced in Europe. Remember, it's not all done in kind of one closed manufacturing facility. They need to acquire in supply chain lots of different ingredients in order to make these vaccines. And even for the European manufactured vaccines like Pfizer, in the likes of Belgium and so on, a lot of the ingredients come from the UK. There is some coverage of a company called Croda International, in case you hear of that name. That's a Yorkshire based company in the UK who supply basically lipid nanoparticles to Pfizer in Europe. So the kind of read-through of this is something that one of our guys was talking about over the weekend in the Ampfire live chat, was that if von der Leyen was to enforce, enforce an export ban on Pfizer vaccines from Belgium, for example, a simple retaliatory measure would be for the UK government to ban the export of those particular ingredients. And the consequence of that would be a swift halt to vaccine production for Pfizer in that facility in Belgium. So it's almost like self-inflicting in a certain way, if you really want to push the button and go a little bit more nuclear on this, this particular confrontation. There is a European Council meeting taking place at the end of this week, so it'd be interesting to see where we stand at the moment. And the reason for that is that Just to update you, the EU COVID situation is getting worse at the moment. Germany is considering an extension of its lockdown restrictions into April and the introduction of new rules for those returning from abroad. So losing track now of the amount of times that that German lockdown has been rolled over. It's been certainly multiple. That follows the tightening of several key restrictions on the lockdown, the likes of France and Paris and also across different regions in Italy last week. And Ireland reported the most cases in nearly a month over the weekend, and that's threatening government plans to loosen some of the restrictions there locally as well. Meanwhile, in the UK, very different story for the time being at least. We obviously know that given the supply issue that's coming from an AstraZeneca facility based out in India that is going to impact the rate of which vaccinations can be administered in the month of April. But for the moment, it's all going at rapid pace, and more than 27.6 million people in Britain now, well over half of the adult population, have now received at least their first dose of the COVID-19 vaccine according to official data yesterday, Sunday. It was a daily record actually. This, this actual chart doesn't quite encapsulate, in fact, the, the last print, which is even higher here. Up to 844,285 doses were administered over the weekend on Sunday, although the government, as I said, has warned that it will slow down next month due to supply crunch. Meanwhile, in the US, one thing that was also has cropped up is an interesting comment out of the former FDA commissioner here talking about basically a variant B.1.526, a variant that's been identified of coronavirus in New York. And basically what, what's being said here is that what they don't understand with this new variant is whether or not people are being reinfected with the virus, or whether or not people who might have been vaccinated are now getting infected with it. So is it the immunity is not enough, or is it you've had the vaccine but that's not enough either? So a couple of things here to watch. One is that the total number of tests remains low so that does potentially skew the results towards more symptomatic people being tested, is one thing to be aware of. But I do think this is potentially something to, to watch because there is some strains of the South African virus that has done a similar thing where it kind of waters down the, the effect then the vaccines in terms of their efficacy rates. And if that were the case, obviously this could be slightly disconcerting if it was to spread beyond then the the New York area, more nationwide for the reopening program that the US have generally going forward. Particularly, I'd say over recent weeks, even months, the COVID cases have been declining so rapidly in the likes of the US, thankfully, in cases and thus hospitalizations and deaths, that there's been a lot of kind of a movement away from tracking of these types of numbers so closely. But If this situation did turn out to be something more aggressive that could spread, that could render that the fact that immunity in itself is not enough or even the vaccine, then certainly we're right back in the thick of it again. And so that's something that markets certainly have not priced in at this point in time. So I'm talking— there's a few things, few dominoes need to fall before we get to that point, certainly. But something I'd be watching for. As we go throughout the week for more information on that matter. Okay, the other thing I wanted to mention was, just because you're probably reading a lot about it, is the Turkish lira got absolutely hammered in the reopening of trade. And the reason for that is because it basically reversed all of the gain that was seen under the former central bank leaders, uh, Akbal performance. Akbul had come in, I believe he was the third central bank chief in Turkey in less than 2 years, but had restored some degree of calm, reflected then in appreciation generally of Turkish assets, adopting a more kind of uniform global approach to central banking, and foreign investors were liking that. But we basically reversed all of the gains then since he came in, and we dropped as much as 17% overnight. So the person coming in, I'm not even going to attempt to say the name, but you can check out the notes on my Twitter post I do every morning. But he's a little-known professor of banking and a former lawmaker from the ruling Justice and Development Party. And importantly, whenever any new policymaker comes in, well, what's their kind of stance on the economy and future monetary policy? So in a recent column that person wrote, basically, the interest rate increases will indirectly lead to an increase in inflation. That is definitely counterintuitive to most modern macroeconomic theory, but it is aligned, of course, with Erdoğan, and who is a vocal opponent of high rates. So there's a lot of politics, as ever, involved with Turkey. And it looks like we're going to go through the latest kind of episode of volatility here. Now, that, as I said, this is the third central bank chief to get the chop in less than 2 years. So, yeah, definitely something there moving the local asset a lot, um, to be aware of. Otherwise, looking at the calendar for the week ahead, um, a few things to be aware of. Today, actually, is one thing that's not actually mentioned here on this calendar, which is you do get the ECB's pandemic emergency purchase program, the PEP update. And if you remember, this is from the meeting when Christine Lagarde was talking about, we're going to significantly increase the pace of our bond buying, but it wasn't really going to kick in if they were in fact doing that and to what degree until the data we're going to see later on today. So it could be definitely quite interesting. Analysts at ING note an increase in net weekly buying to above €20 billion. So this is your kind of reference point, would be seen as sizable and could provide some support to European debt markets and perhaps even slow the rise in US yields. So definitely keeping an ear out for €20 billion above or below is indicative then of that move. Otherwise today, yeah, you do have Fed Chair Powell takes part in the BIS panel and central bank on central bank innovation. There's a lot of other actual um, central bank speakers coming throughout the day. So something to just be aware of. Otherwise, going over to UK, um, UK, you get the jobs data on Tuesday morning. But just quickly to show you and stick with the UK, you got UK CPI on Wednesday morning. So these numbers at 7 o'clock, and then on Friday you get UK retail sales as well. So jobs data Tuesday, CPI Wednesday, UK retail sales on Friday. I would say overall these would normally be tier 1 market movers, but just given the context of having already seen the Bank of England meeting just a few days ago last week, and also the fact that they're in a holding pattern really now for the foreseeable future, I don't really think that this data has the propensity to really move the needle a great deal. So something to be aware of if you are a sterling trader, but I don't really think it's going to be the be-all and end-all this week. I'm still looking for dollar fluctuation movement to be the real guideline for a lot of these major currency pairs. Otherwise, Tuesday and Wednesday— Tuesday, the first day where Powell and the newly appointed Treasury Secretary Janet Yellen will appear before the House panel on the CARES Act. They're going to repeat that on Wednesday, I believe. And this is kind of a joint session where they're going to be questioned on things like the response to the pandemic, including the US stimulus package as well that's just been unveiled of that £1.9 trillion. Otherwise, again, littered with lots of central bank speak, as you can see here from the Bank of England's Haldane, Cunliffe, all the way through to Bostic, Brainard, Williams, Bullard, all talking on Tuesday as well. Now moving further forward, Wednesday's a very important day as far as the calendar is concerned. That's when we get the flash PMI service manufacturing numbers for March. So we get the UK— well, Europe, the UK in the morning, and followed by the US in, in the afternoon as well. So definitely that will be quite key, and it may well reflect the contrast at the moment that we're seeing between chiefly the COVID underlying situation and the vaccination rollout, causing a divergence between them. The state perhaps of these PMIs where UK and US and more positive than that of mainland Europe for the time being. Um, going further forward to Thursday, you've got Bank of England Governor Bailey speaking, Central Bank Innovations, a similar kind of event to that of Powell speaking today. Uh, more CB speakers throughout that day. Then you've got the Q4— I think it's the final reading of GDP for the US. And then on Friday, um, German IFO, um, personal spending, which would be quite interesting to look at. If it does encapsulate any of those stimulus checks, which perhaps might not show up until the following month's data. But that, that's pretty much it. And then you've got the European Council meeting as well on Thursday and Friday, as mentioned here at the top. So don't forget, the US clocks are still ahead of us. The UK clocks, I don't believe, change until this weekend. So all of the market hours, if you're based in London, are going to be still an hour earlier for US opens. So uh, the open of Wall Street at 1:30, major US data typically at 12:30, so on and so forth. So just remember that as well. Otherwise, that is it. I'm gonna let you guys get on with it. Any questions at all, just feel free to, to leave a comment on this video. Absolutely happy to get back to you and help if I can. Otherwise, for the Amplify Live community, I'll see you on the Discord room. Thanks very much, have a good week.