English
11
Jan

ECB’s Lagarde Speech, Tesla at Record High

calendar 11/01/2021 - 08:54 UTC

While the US dollar continued to recover lost ground, emerging market currencies including the South African rand (ZAR) and the Turkish lira (TRY) faced some pressure, while the EUR/TRY pair was again trading above the 9.0-mark after closing marginally below that level on Friday.

Equity markets opened lower for the European trading session on Monday after the bull-run over the course of the last week, which also saw the Germany 30 index reach a new all-time high. The Volatility Index VIX rose moderately from the low at the end of the previous week.

A strong retracement took place in the crypto markets after Bitcoin was unable to push towards a new high above the $41.5k level. Still, on a weekly basis the biggest cryptocurrencies including Bitcoin and Ethereum are still solidly in the green.

For Monday relatively few fundamental data releases are expected besides speeches from central bankers including the European Central Bank (ECB) President’s Lagarde can be expected.

EUR/USD

The EUR/USD rate faced a retracement for the third trading day in a row with the rate falling below 1.22 for the first time in the year driven by the strong recovery of the dollar.

Fundamental data released on Friday was quite mixed with the EU unemployment rate surprisingly recovering in November from 8.4% in the previous month to 8.3%. In the US the unemployment rate remained stable at 6.7% and average hourly earnings surprisingly improved by 0.8% compared to the previous month. The amount of consumer credit also expanded faster than in the previous month at $15.3 billion compared to $7.2 billion at the previous reading.

More significant fundamental data can be expected over the course of the week, which will include the US CPI released on Wednesday as well as EU and Italy’s industrial production data.

EUR/USD

Gold

Gold prices stabilized on Monday trading around the closing levels from Friday, when gold prices fell by more than three percent in one single day. That day the sentiment in most previous metals was similarly negative with palladium, silver and platinum also closing deep in the red.

Some of the contributing factors to this move at least from the fundamental-theoretical standpoint could be the recovering dollar, which made those metals again more expensive in other currencies, as well a the ever-rising yield benchmark on 10-year US Treasury notes which at times reached the level of 1.12%. While these numbers would indicate a higher opportunity costs of holding gold, which does not bear any interest. On the other hand, long-term investors need to watch out for the impact of inflation. A recent report by Bloomberg indicates that traders could see a 10-year breakeven rate, which is also seen as measure on pricing inflation rising at times above 2%. If so, in real-terms yields on Treasury Notes could be also described as heading into the negative territory.

Gold

WTI Oil

Oil prices opened noticeable lower at the start of the new week after jumping to a new high since February 2020 with a barrel of WTI crude oil traded above $52. Oil and other energy commodities’ prices were last week supported by the OPEC+ agreement and the unilateral pledge by Saudi Arabia to further cut its own crude oil production. Also the cold spell across the Norther Hemisphere was attributed to the increase in demand, while some reports indicated that China was not able to cover the demand for electricity possibly due to the curb of Australian coal imports following a diplomatic spat between the two countries.

On Tuesday the American Petroleum Institute (API) is publishing its weekly statistical bulletin, which will include among other data the weekly change in crude oil stockpiles. Then on Wednesday the Energy Information Administration (EIA) is following up with its own statistics which also include weekly inventory statistics on crude oil, gasoline and distillates.

WTI Oil

US 500

Key stock market indices opened in the red on Monday with losses somewhat extending during the trading session after markets hit a new all-time high during the previous week, in part fuelled by hopes that an orderly transition to a US Presidency led by the democrats could unlock more fiscal stimulus measures.

Still fundamentals were showing a quite mixed picture with the non-farm payrolls (NFP) indicating a decline in payrolls by 140 thousand during December, while expectations were that payrolls would modestly increase. This could spell some doubt on the hopes that the real economy is on a path of a recovery after the crippling shutdowns in the first half of 2020.

Stocks of Tesla (+7.82%) continued pushing towards a new all-time high, solidifying the lead of its founder Elon Musk as the richest person on Earth ahead of Amazon’s Jeff Bezos. The year-to-date performance of Tesla shares is already +25% after the spectacular run during the previous year.

This week still relatively few quarterly results can be expected ahead of the earnings season which will start next week. As often the case, Wall Street banks including the likes of JPMorgan Chase, Citigroup and Wills Fargo will kick off the reporting season on Friday.

US 500

The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.