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Sentiment in the currency markets was quite mixed over the past few days. While the dollar stabilized against other major currencies, the pound sterling (GBP) continued to rally, reaching yet another high since April 2018. In emerging markets the dollar gained in pairs like USD/ZAR or USD/RUB. Meanwhile the USD/INR pair continued to move South. The bullish sentiment is credited with investor inflows into the market, while the currency pair is at the lowest level since March 2020. The Turkish lira (TRY) remains at this time very close to the 7.0 mark of the USD/ZAR pair.
While major stock market indices closed on Friday almost unchanged, a strong downside was observed after markets reopened following the weekend. Especially the Chinese market, which was extremely bullish over the past two weeks took a hit as the China A50 index was at times down by 4.5 per cent since Friday. Other markets did not face such dramatic losses, but still the more than one per cent decline in the US Tech 100 for example also should not be discounted. Investors seem to be especially anxious about the rapidly rising yields over the past week and the continued rise seen in the bond markets on Monday morning.
Sentiment in the crypto markets was quite mixed over the weekend. While Ethereum initially jumped above the $2k mark, it later retraced even below $1,900. Bitcoin meanwhile remained at a market capitalisation of well over one trillion dollars, while the overall market cap of all cryptos at times was more than $1.8 trillion. Over the past week most well-known cryptos quickly appreciated in price, but while for some this was a moderate move up like for Litecoin or Ethereum, which are up less than five per cent on a weekly basis, some altcoins gained more than hundred per cent of their value.
The EUR/USD pair maintained its position around the 1.21 mark by Monday morning. At the same time the pound sterling (GBP) continued to outperform most other major currencies, while the Swiss franc (CHF) significantly weakened as the EUR/CHF pair broke out above 1.09 for the first time since June 2020.
PMI data released on Friday was quite mixed. The continued lockdowns seem to take their toll on the service sector as the EU services PMI failed to recover and further deteriorated from 45.0 at the previous reading to now 44.7. On the other hand, the manufacturing PMI strongly improved from 57.7 to 57.7. A PMI above 50 means that overall favourable conditions are expected, while one below 50 shows that expectations are rather negative.
Over the course of this week EU CPI data and the German GDP statistic will be released. The Italian CPI released on Friday indicated a slow uptick in inflation as the index improved by 0.4% annually after a 0.2% reading in the previous month.
Gold prices slowly recovered over the past few days and continued to test a resistance around the $1,795 level. Silver and platinum prices trade mostly side-ways, while palladium briefly reached a new one month high and then retraced lower.
It remains to be seen what impact the rapidly rising yields have on gold as the US Treasury Note 10-year yield benchmark briefly crossed above 1.38% by Monday morning. The major question remains is how fast inflation will come back and thus affect the real yields (i.e. the nominal yield paid less the inflation impact).
One key event this week could be the release of the PCE Price Index for January as this is an indicator used by the Federal Reserve to determine its monetary policy.
Oil prices closed lower on Friday, which also meant that on a weekly basis crude oil prices were in the red after reaching a new one year high during the same week. Am moderate upside was seen at the start of the new week, with the WTI crude oil future again testing levels above $60 per barrel.
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.
Major US stock market indices closed almost unchanged on Friday. While the increasing yields in the market are increasingly worrying investors, fundamentals remain overall positive with existing home sales numbers in January continuing to show strong demand as the number reached 6.69 million, which was better than expected.
Sentiment among the sectors was quite mixed. While chip (US Semiconductors ETF +2.00%) and energy (US Energy ETF +1.65%) closed with a strong upside, utilities (US Utilities ETF -1.56%) and consumer essentials (US Non-cyclicals ETF -1.28%) closed in the red.
Palantir (+15.29%) strongly recovered after a week performance during the rest of the week ahead of the expiration of the lockup period for some investors expired on Thursday.
Tesla (-0.76%) meanwhile closed for the second week in a row lower. After peaking around a month ago, the stock price failed to make further advances higher above $900 and with this in mind Jeff Bezos again replaced Elon Musk as the supposedly richest man on earth.
On Monday companies including Palo Alto Networks and Zoominfo are releasing their quarterly results. Then on Tuesday earnings from Medtronic, Square and Upwork will come in.
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