An upbeat session saw US equities rise - the S&P500 up 0.9% - and the defensive US dollar fall slightly. Bond yields, though, fell slightly. Janet Yellen’s Treasury Secretary confirmation hearing attracted market attention urging lawmakers to "act big" on the next coronavirus relief package, adding that the benefits outweigh the costs of a higher debt burden. Yellen said her task as Treasury chief will be to rebuild the economy "so that it creates more prosperity for more people and ensures that American workers can compete in an increasingly competitive global economy." She sought backing for Biden’s $1.9 trillion Covid-19 relief plan: “Right now, short term, I feel that we can afford what it takes to get the economy back on its feet, to get us through the pandemic”, highlighting that interest rates are historically low and that debt-servicing payments as a share of the economy are lower today than before the 2008 financial crisis - “It would be a false economy to stint.”
Commodities, Brent crude oil futures rose 2.2% to $55.95, copper rose 0.7%, iron ore fell 1.7% to $169.65, and gold fell 0.1%. The bi-monthly GDT dairy auction resulted in an overall price rise of 4.8%, with whole milk powder rising 2.2%.
Overnight Currency Ranges
AUD/USD: 0.7690 – 0.7725
EUR/USD: 1.2086– 1.2145
GBP/USD: 1.3586 – 1.3628
USD/JPY: 103.84 – 104.08
USD/CAD: 1.2716 – 1.2764
NZD/USD: 0.7103 – 0.7137
AUD/JPY: 79.86 – 80.32
AUD/NZD: 1.0814 –1.0842 (3 month high)
The main economic event markets will be watching in the UK this afternoon where their CPI will be updated for December. Inflation has been concerningly low ahead of the December CPI, but some price pressures may emerge as the effects of the VAT cut and low energy prices dissipate.
The AUD traded to a high of 0.7725 yesterday before retreating to the 0.7690 region in late trade. Offering interest has likely increased rests ahead 0.7750 and again at 0.7820 while demand is expected to be plentiful if we dip back to 0.7640.
Event Risk Data Today
Australia: January Consumer Sentiment Index will be released. Sentiment hit a 10-year high in December on strong jobs growth, an initial wave of vaccinations abroad, and continuing containment of the virus locally. However, since then, we have seen an outbreak in Sydney’s Northern Beaches and a temporary lockdown in Brisbane.
UK: Inflationhas been concerningly low ahead of the December CPI, but some price pressures may emerge as the effects of the VAT cut and low energy prices dissipate.
US: January NAHB housing market index is expected to stay around its current level of 86 – a robust reading, but a notch below its record high in November. November total net TIC flows will round out the day’s major releases.