29th January 2021 - Speculation overshadows sentiment, dollar under pressure

Updated: Feb 4

Good Morning,

Market Headlines

The financial world gyrated around equities once again, but stocks weren’t driven by sentiment. For a change, the escalation of the GameStop scandal led the way. To put it in a few words, individual investors pushed the share sharply higher and triggered alarms everywhere. Trading was halted in some platforms, in detriment of single investors which were spurring losses within hedge funds.

Those investors gathered on forums, turned their eyes into silver, sending the metal over 5% up intraday, which in turn, pushed oil and gold higher and dragged Wall Street alongside. This is an undergoing story, and will probably continue affecting financial markets in the next few days. US Treasury yields ticked higher, following mostly encouraging US data. Q4 GDP came in at 4% while Initial Jobless Claims declined to 875K.

Gold was unable to hold on to intraday gains and closed the day unchanged around $1,843 a troy ounce. Crude oil prices also trimmed early gains, with WTI settling at $52.30 a barrel.

Overnight Currency Ranges

AUD/USD: 0.7592 – 0.7697 (one month low)

EUR/USD: 1.2081 – 1.2142

GBP/USD: 1.3631 – 1.3745

USD/JPY: 104.07 – 104.46 (six week high)

USD/CAD: 1.2790 – 1.2881

NZD/USD: 0.7106 – 0.7195

AUD/JPY: 79.17 – 80.23

AUD/NZD: 1.0676 – 1.0713

AUD Thoughts

Another busy day on the data calendar but outside of the U.S income data most other releases should be uneventful. The AUD took out some significant downside support on its way to a low of 0.7592 overnight before recovering to trade unchanged on the day. Further technical resistance rests at 0.7590 and again at 0.7520 while offering interest likely rests ahead of 0.7820.

Event Risk Data Today

Australia: Credit to the private sector inched higher in November, up 0.1%, following four consecutive monthly declines. Business and personal credit are contracting, although the interest rate sensitive housing sector is lifting from its lows. On balance, markets is looking for December private credit to grow 0.1%. The Q4 PPI will also be published, following Wednesday’s stronger-than-expected CPI.

NZ: Sentiment has been firming ahead of the January update of ANZ consumer confidence. Markets expects that the January employment indicator will soften by 0.3% as the lack of summer tourists bites.

Euro Area: The M3 money supply will remain elevated as the ECB continues to support the economic recovery (market f/c: 11.0%).

US: The market anticipates that personal income will rise 0.3% in December, and the prospects of stimulus present further upside ahead. However, December personal spending will be hit by the COVID-19 surge and a spending pull forward (f/c: -0.4%). Absent any signs of inflationary pressure, Markets is looking for a muted 0.1% rise in the December core PCE deflator, for a 1.3% annual pace (from 1.4%). Likewise, wage gains will remain weak for the foreseeable future – the December wage cost index tipped to advance 0.4%. Supply constraints and high prices should continue to limit pending home sales in December(market f/c: -0.5%). Finally, the FOMC’s Kaplan (05:00 and 08:00 AEDT) and Daly (09:25 AEDT) will speak.

China: To be released on Sunday, the manufacturing PMI has been supported by surging external demand, but may dip from recent highs in the January update (market f/c: 51.5). Whilst the non-manufacturing PMI should remain broadly stable at 55.0, the consumer recovery has been more modest.