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Many currencies continued trading in the new week in the same direction as seen last week. The US dollar was again trading moderately lower, while the pound sterling (GBP) rallied on. Currency pairs like the USD/ZAR and USD/TRY were overall stable, while the USD/MXN pair pushed again higher, rising by almost four per cent over the course of one week. The USD/INR pair meanwhile reached yet another 11-months low.
Equity markets extended their losses on Monday, while by Tuesday morning most markets seemed to have stabilized at the low end of what was seen at the start of the week. Despite all this turmoil, the Volatility Index VIX, which was already elevated last week traded almost unchanged.
Cryptocurrency markets suffered significant losses at the start of the week, with the overall market capitalization plummeting from more than $1.8 trillion to just above $1.5 trillion. Bitcoin prices were also subject to such volatility but for now traded still around the $50k mark. The decline in Ethereum was far more significant with the second biggest cryptocurrency by market capitalization trading more than 20 per cent down from the recent high and even on a weekly basis losing around ten per cent.
On Tuesday the EU CPI numbers for January can be expected, while from the US data on house prices as well as the Conference Board’s Consumer Confidence Index and then also the Richmond Fed Manufacturing Index will be published.
The upside move of the EUR/USD pair could likely be mostly attributed to the weakness of the greenback, as the euro itself was overall stable and following continued market trends, such as further declining against the strong pound sterling (GBP), while at the same time appreciating in the EUR/CHF pair.
The German Ifo survey on currency conditions was surprisingly positive, improving from 90.1 in the previous reading to 92.4. US fundamentals were also looking well with the Chicago Fed National Activity Index further improving from 0.52 to 0.66 and the Leading Indicators from 0.3% to 0.5%.
On Wednesday morning the consumer price index (CPI) for the euro zone will be released. It is expected that on an annual basis inflation will start coming back.
Gold prices strongly appreciated on Monday, breaking above the $1,800 mark. A similar upside could be seen in the silver market with a troy ounce of silver trading again above $28, marking a new 3-weeks high.
The rapidly increasing yields on US Treasuries and accordingly made prediction by analysts could have moved precious metal price as well over the past days. Long-term investors will not only have to keep the nominal yield, which for example for the 10-year US Treasury Note benchmark peaked above 1.38%, but also the real yield when adjusted for inflation. The significant amount of asset purchases done by central banks and fiscal stimulus measures are seen by some analysts as threatening to the stability of fiat currencies. It remains to be seen if the policies implemented to manage the financial crisis more than a decade ago will be still enough to weather the pandemic and the economic fallout from the changes in collective behaviour.
Oil prices rallied this week, recovering from the slump seen on Thursday and Friday last week and reaching a new one-year high as WTI crude oil hit the $63 per barrel mark.
The cold spell affecting the Northern hemisphere and especially North America is not only causing an increased demand for energy used for heating but also affects production as some oil wells and facilities especially in Texas had to be temporarily shut down.
On Tuesday the American Petroleum Institute (API) releases its weekly statistical bulletin which includes data on weekly crude oil inventory changes and other statistics. Then on Wednesday the Energy Information Administration (EIA) follows up with its weekly release which among other data includes the change in inventory of gasoline, distillate and crude oil stockpiles.
Another key event to watch out for could be the OPEC+ meeting next week. Reports indicate that Russia could seek to increase production quotas faster than what Saudi Arabia would like. Around this time a year ago the first OPEC+ alliance broke down over disagreements between these two countries.
Stock market indices closed again lower at the start of the new week. Especially tech (US Technology ETF -2.14%) and chip stocks (US Semiconductors ETF-3.53%) were under pressure while given the rising oil prices and yields energy (US Energy ETF +3.49%) and banks (US Banks ETF +1.79%) respectively continued to improve their positions.
Another sector with a strong upside was the travel industry with stocks like American Airlines (+9.59%), United Airlines (+3.53%) and Wynn Resorts (+2.49%) closing higher while the market overall turned red.
Steep losses were seen in Tesla (-8.50%) as the stock traded at the lowest level seen in 2021.
On Tuesday earnings from companies including Medtronic, Home Depot, Square and others are reporting their quarterly results. The on Wednesday Jumia, Lowe’s, Eaton Vance, Nvidia are providing their results.
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