Currencies
Further, higher fiscal stimulus in the US, persistent soft monetary policy stance of global bankers and weak dollar should continue to act as key tailwinds for FPIs flows. The dollar-o-meter framework includes growth, inflation, central bank policy, politics, as well as thoughts on the dollar smile. The US dollar has been gaining ground as investors sell Treasuries in response to higher prospects of a generous relief package (FXB, UUP). FOREX: The euro traded near a 2-month low against the dollar, as investors looked to a widening disparity between the strength of U.S. and European pandemic recoveries.
The political outlook and the dollar smile appear more negative, but primarily from a structural / medium term perspective. From this update, we see greater upside risks for the dollar than generally appreciated.The consensus trade of a higher EUR/USD in 2021 has so far failed to materialise. The safe-haven dollar dropped on hopes that the US would recover faster and that it would pull the entire world forward.
=> We nonetheless judge the outlook for politics and uncertainty as generally negative for the dollar, especially for the medium and long terms. This may augur a structural shift down in the dollar smile – as the US will export more dollars via a larger current account deficit than otherwise. We also incorporate the dollar smile theory into our analysis.
The political outlook and the dollar smile appear more negative, but primarily from a structural / medium term perspective. From this update, we see greater upside risks for the dollar than generally appreciated.The consensus trade of a higher EUR/USD in 2021 has so far failed to materialise. The safe-haven dollar dropped on hopes that the US would recover faster and that it would pull the entire world forward.
=> We nonetheless judge the outlook for politics and uncertainty as generally negative for the dollar, especially for the medium and long terms. This may augur a structural shift down in the dollar smile – as the US will export more dollars via a larger current account deficit than otherwise. We also incorporate the dollar smile theory into our analysis.
Metals
In our last post (Silver Isn’t The Next GameStop), we wrote that, unlike GameStop, the WallStreetBets crowd wasn’t buying silver or silver ETFs such as SLV. However, the last week or so, on the heels of the Reddit-Raiders taking aim at Silver, demand for silver (and gold coins) has exploded… the U.S. Mint said Tuesday. If SLV continues to rise, it brightens the outlook for silver miners but raises input costs for manufacturers that use silver in their production process.
less Gold prices edged slightly higher on Wednesday as silver prices attempted to recover some lost ground after falling over 8% on Tuesday. While silver prices swung as much as 20% from January 28th to February 1st, gold prices moved only 1.7% during the same period. Speculative activity on silver appeared to have cooled after the CME raised margin requirements, allowing a return of market focus on the fiscal stimulus and pandemic situations. less The short squeeze in silver failed and led to a dramatic, nasty bearish reversal.
Enthusiasm surrounding the retail trader frenzy led to heightened volatility in silver earlier this week, but the spillover effect on other precious metals wasn’t particularly obvious. He writes a bi-weekly in-depth analysis for one of Germany´s largest gold and silver retailer the “pro aurum group”. As well he is publishing his bi-weekly comprehensive for his numerous international readers focusing on Gold, Silver, Mining, commodities and cryptocurrencies.
less Gold prices edged slightly higher on Wednesday as silver prices attempted to recover some lost ground after falling over 8% on Tuesday. While silver prices swung as much as 20% from January 28th to February 1st, gold prices moved only 1.7% during the same period. Speculative activity on silver appeared to have cooled after the CME raised margin requirements, allowing a return of market focus on the fiscal stimulus and pandemic situations. less The short squeeze in silver failed and led to a dramatic, nasty bearish reversal.
Enthusiasm surrounding the retail trader frenzy led to heightened volatility in silver earlier this week, but the spillover effect on other precious metals wasn’t particularly obvious. He writes a bi-weekly in-depth analysis for one of Germany´s largest gold and silver retailer the “pro aurum group”. As well he is publishing his bi-weekly comprehensive for his numerous international readers focusing on Gold, Silver, Mining, commodities and cryptocurrencies.
Oil
That is despite having lowered its forecast for oil demand growth this year to 5.6 million barrels per day (bpd), 300,000 bpd less than OPEC’s most recently released estimate. less Oil prices are surging to new 11-month highs as global oil supplies are projected by OPEC+ to be in deficit in 2021. OPEC Plus projects that the oil market is in deficit throughout 2021, peaking at 2.0 million barrels per day in May according to Reuters. BEFORE THE BELL Futures for Canada’s main stock index rose as crude oil prices reached 11-month highs, helped by a fall in U.S. inventories.
A further drawdown in US and China oil inventories is helping crude prices consolidate near the recent highs. Oil hit an 11-month high, boosted by lower U.S. crude and gasoline inventories. U.S. crude inventories fell by 4.3 million barrels in the week to January 29 to about 477.6 million barrels, data from an industry body showed. The biggest conflict in the group has been how to mage cutting output and raising prices without facing a flood of oil from U.S. shale.
Not only will we see an oil deficit, but these policies will also add to the trade deficit.
He has a plan to build back better and that plan will include using more imports of OPEC oil and gas.
A further drawdown in US and China oil inventories is helping crude prices consolidate near the recent highs. Oil hit an 11-month high, boosted by lower U.S. crude and gasoline inventories. U.S. crude inventories fell by 4.3 million barrels in the week to January 29 to about 477.6 million barrels, data from an industry body showed. The biggest conflict in the group has been how to mage cutting output and raising prices without facing a flood of oil from U.S. shale.
Not only will we see an oil deficit, but these policies will also add to the trade deficit.
He has a plan to build back better and that plan will include using more imports of OPEC oil and gas.
United States
Wall Street futures rose a day after strong quarterly earnings reported by heavyweights Alphabet and Amazon and on fresh hopes over progress of the pandemic relief package. The Nasdaq resumed its upward trajectory as the focus shifts back to earnings and away from the retail trader short squeeze frenzy of last week. US stock futures are trading higher today indicating a positive opening for Wall Street indices with Dow Futures trading up by 37 points (up 0.1%).
The Dow Industrials and the Russell 2000 Small Cap Index (IWM) were down one percent and 3.3 percent respectively, but the Nasdaq Composite rallied two percent. As was the case in the US, the Canadian job market ended last year with rather discouraging economic statistics. The company might reach a deal to sell the business to Hormel Foods as soon as next week for around $3 billion, The Wall Street Journal reported Tuesday. Amgen Inc: U.S. biotech company provided a 2021 earnings forecast below Wall Street estimates and said it had paused or halted enrollment for clinical trials of three cancer drugs.
This could lead to a positive cycle, fed mainly by an increase in service sector consumption, of rapidly improving employment in the service sector leading to better income development. less With The Fed printing money ‘out the wazoo’, monetizing COVID relief package debt as fast as Congress can pass the bills, demand for bullion was already surging. Tuesday’s fourth-quarter results were no exception, slightly topping Wall Street’s estimates for sales and adjusted earnings before interest, taxes, depreciation and amortization.
The Dow Industrials and the Russell 2000 Small Cap Index (IWM) were down one percent and 3.3 percent respectively, but the Nasdaq Composite rallied two percent. As was the case in the US, the Canadian job market ended last year with rather discouraging economic statistics. The company might reach a deal to sell the business to Hormel Foods as soon as next week for around $3 billion, The Wall Street Journal reported Tuesday. Amgen Inc: U.S. biotech company provided a 2021 earnings forecast below Wall Street estimates and said it had paused or halted enrollment for clinical trials of three cancer drugs.
This could lead to a positive cycle, fed mainly by an increase in service sector consumption, of rapidly improving employment in the service sector leading to better income development. less With The Fed printing money ‘out the wazoo’, monetizing COVID relief package debt as fast as Congress can pass the bills, demand for bullion was already surging. Tuesday’s fourth-quarter results were no exception, slightly topping Wall Street’s estimates for sales and adjusted earnings before interest, taxes, depreciation and amortization.
China
The PBOC unexpectedly drained liquidity, and this may have deterred buying of Chinese stocks, a notable exception in the regional rally. Politics On the political front, the outing of the “Mango Mussolini” from the White House to be replaced with “Beijing Biden” is widely seen as lowering global economic-political uncertainty.
Europe
While inflation turning positive should be a relief for the ECB, most of the reasons underlying today’s spike are temporary and should not affect policy much. We expect the ECB to stay with its forward guidance, implying easy financing conditions until inflation is projected to return to target. Monetary policy being so loose out of the European Union (EZU) and other central banks around the world almost certainly guarantees that stocks will rise over the longer term.
The EU has a substantial amount of AZ’s doses in the pipeline, so that is good news also for the continent – but deliveries are still delayed. Italy’s coalition government collapsed in January over arguments about how to spend European Union funding meant to spur the recovery from the Covid-19 pandemic. Cabinet Office Minister Michael Gove is demanding the EU ensure the smooth flow of trade between Britain and Northern Ireland, amid rising tensions in the region. Firstly, the multi-year Brexit soap opera ended as best it could with the free trade agreement between the EU and the UK.
From that perspective, today’s numbers may ease the pressure on the ECB a little bit. The DAX is an index that should be thought of as the “blue-chip index” of the European Union, with some of the largest companies in the world. Based on the ECB’s approach and estimates in October 2020 we can calculate a QE-derived fair value for the EUR/USD exchange rate.
0 The EU has a substantial amount of AZ’s doses in the pipeline, so that is good news also for the continent – but deliveries are still delayed. Italy’s coalition government collapsed in January over arguments about how to spend European Union funding meant to spur the recovery from the Covid-19 pandemic. Cabinet Office Minister Michael Gove is demanding the EU ensure the smooth flow of trade between Britain and Northern Ireland, amid rising tensions in the region. Firstly, the multi-year Brexit soap opera ended as best it could with the free trade agreement between the EU and the UK.
From that perspective, today’s numbers may ease the pressure on the ECB a little bit. The DAX is an index that should be thought of as the “blue-chip index” of the European Union, with some of the largest companies in the world. Based on the ECB’s approach and estimates in October 2020 we can calculate a QE-derived fair value for the EUR/USD exchange rate.
