GBP: Vaccines versus sentiment
EUR: Lots of ECB chatter this week
USD: Dollar heading into earnings season
Sterling has managed to recover some of Friday’s losses through the overnight Asian session but the wider data picture will certainly call into question optimism around the pound. Friday’s PMI sentiment numbers were poor and showed contraction in all three sectors – construction, services, manufacturing – that were surveyed.
It remains our belief that the pound struggles as 2021 goes on as a result of poor business output with both business and consumer facing companies unable to shake off the depressing effects of both Brexit and Covid-19.
We do think sterling will find support from the ongoing outperformance of the UK’s vaccination program, especially given figures in parts of the EU, but remains at risk of a slowdown on supply issues.
The single currency fought back last week in the aftermath of the European Central Bank meeting on Thursday and a broadly supportive risk atmosphere should allow for the euro to engage in a greater climb higher as well.
This week is full of ECB speakers – there are six today – and so we must watch to see just how cohesive the central bank’s policies are.
The USD is on the backfoot this morning as all anyone wants to do is talk about stock markets and how much farther they can run higher. Stimulus expectations remain high despite concerns increasing in Washington about how many votes a $1.9trn plan is able to garner in the US Senate despite 50 Democrats now holding seats there.
For stocks earnings season begins this week and everyone will be waiting to see whether the tech names can power the market through a data calendar that will likely confirm the US economy’s descent into a double-dip recession.
Given the recent runs, Tesla and Apple will be front and centre of investors’ minds this week and both come on Wednesday; just as the Fed announces its latest policy and press conference.
There has been little caution in equity markets for about 10 months now and we don’t expect those juicing stocks higher to start anytime soon. This week could be a negative one for the USD.
With risk assets moving higher in Asia there is no surprise that the yen is weaker and the Aussie dollar stronger this morning. Both will have been ably supported by the news that a two-day Covid-19 lockdown in the Kowloon district of Hong Kong has come to an end.
Have a great day.