Wall St struggled to maintained its minor gains into the close with the Dow -0.1% at 31030, S&P +0.1% at 3814, and the NASDAQ flat at 13119. Fed Chair Powell struck a dovish tone in a virtual roundtable discussion, commenting that there would be no hikes unless there was troubling rise in inflation, that the US was a long way from full employment and the time to raise rates was “no time soon”. He also said that the Fed would be very transparent on tapering though there would need to be very substantial progress on goals for this to occur. US 10 year yields rose 4bps while oil also had a good session and was almost 1% higher. Commodities, Crude +0.3%, Copper +0.5%, Wheat +1.3%, Iron ore +2.1% Gold $1846/oz.
Overnight Currency Ranges
AUD/USD: 0.7741 – 0.7805
EUR/USD: 1.2111– 1.2179
GBP/USD: 1.3621 – 1.3712
USD/JPY: 103.57 – 104.16
USD/CAD: 1.2625 – 1.2704
NZD/USD: 0.7178 – 0.7240
AUD/JPY: 80.52 – 80.84
AUD/NZD: 1.0770 –1.0795 AUD Thoughts
Impeachment theatrics will likely steal much of the headlines in the press until the end of the week but are unlikely to affect markets much. Indeed, the US House just voted to impeach the President, with the Democrat majority backed by a number of angry House Republicans. However, the Leader of the Senate Republican Minority Mitch McConnell has indicated that he will not consent to reconvene the Senate immediately, meaning that there is practically no chance that a vote on US President Donald Trump’s impeachment will be possible in the Senate before the end of his term in office.
That means impeachment will have to happen under the Biden administration, something which some fear might get in the way of/distract from the Biden administration's legislative priorities, such as further Covid-19 aid. However, any delays ought not to be more than a few weeks which will matter little to the US economic outlook and thus ought not to matter too much to markets.
Much more important for the stock market for the rest of the week will be the incoming* US President Joe Biden’s stimulus plan announcement, as well as a speech by the Chairman of the Federal Reserve Jerome Powell. On the former, details leaked on Wednesday indicated the plan will include generous benefits for poor and middle-class families with children. On the latter, markets are on the lookout for what Powell says regarding the bank’s plans to eventually taper its asset purchase programme, as other Fed officials like Fed Vice Chairman Richard Clarida, he is likely to say something along the lines of it being far too soon to be thinking about tapering and that the current pace of purchases is likely to be appropriate at least through 2021. Meanwhile, earnings season kicks off on Friday with earnings from some of the big US banks.
AUD was buoyant on its way to a high of 0.7805 overnight with the double top at 0.7820 still the next meaningful resistance while support can be found at 0.7730 and again at 0.7640.
Event Risk Data Today
AU - November Home Loans
UK - November Industrial Production and Trade Balance
US - December PPI
US - January Empire Manufacturing
US - December Retail Sales
US - December Industrial Production
US - January University of Michigan Sentiment Survey