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Intermarket:
- SP Futures 3827 (-0.55%)
- EUSTXX 3537 (-0.08%)
- Crude Oil 52.40 (-0.71%)
- US 10YR 1.04 (-0.35%)
- EurUsd 1.2129 (-0.07%)
- UsdJpy 103.74 (-0.02%)
- DAX 13631 (+0.01%)
Risk assets are trading lower into Tuesday, retreating from record highs on concerns about potential roadblocks to Biden’s $1.9 trillion stimulus package and vaccine distribution issues. A Handelsblatt story says Germany is expecting vaccine efficiency of only 8% for the AstraZeneca/Oxford vaccine in the >65s. If confirmed, this could seriously impact market sentiment.
Furthermore, tomorrow’s FOMC statement will also be influential as the dovish Fed policy is a key driver for (higher) risk assets and (lower) USD.
Italian PM Conte will announce his resignation today at 0800 GMT, hoping to be given a mandate by Mattarella to form a new government. Should he fail, the task is given to someone else. If no government is formed, fresh elections will be held. Meanwhile, Brussels has moved to tighten rules on vaccine exports outside the EU.
Looking ahead: UK employment is due at the top of the hour. US companies reporting today include Microsoft, Starbucks, UBS and chip manufacturer AMD.
Matters that Matter:
• U.S. Senate votes overwhelmingly to confirm Yellen as first female Treasury chief
• Biden signs ‘Buy American’ order, pledges to renew U.S. manufacturing
• Democrats may try to pass Biden’s COVID bill with majority vote -Schumer
• �?This is not normal’ – Wall Street grows wary of stock bubbles
• Some BOJ policymakers called for making ETF buying flexible - Dec 17-18 Policy Board minutes
• ‘Together we are stronger’ - Germany bets on better U.S. ties under Biden
• China, New Zealand ink upgraded free trade deal
• China to conduct military drills in S. China Sea amid tensions with U.S.
• PM Ardern: New Zealand may approve first vaccine next week; Pfizer/BioNTech vaccine will be first for approval; FTA upgrade with China to be signed today; travel with certain Australian states may be easier
• NSW Health: Anyone who has arrived in NSW from New Zealand since Jan 14 must get tested for coronavirus and isolate until they get a negative result
• Riot police in the Netherlands have again clashed with protesters defying a curfew, following a weekend of unrest.
Majors 1-Day View:
USDJPY
- Prices closed little changed for the 2nd week in a row on Friday, highlighting investor indecision. Monday echoed this stance with a little changed close at the daily level. Signals remain mixed and we suggest remaining square in between 103.22/104.40.
- Little direction, USD on hold, yields lower.
- Risk mood soggy on Covid and vaccine issues.
EURUSD
• Prices interrupted a sequence of higher daily lows on Monday, and with sellers returning in Asia trade, the bias has shifted to a cautious short stance for Tuesday.
• EUR heavy on the crosses into the week.
• Vaccine delays, Italy gov crisis, weak EU data weigh
AUDUSD
• Prices posted a little changed close on Monday, but losses in Asia trade have weakened the outlook into Tuesday and as such the bias shifts to a cautious negative stance.
• Aud trades lower in holiday thinned trade.
• Offers ahead of .7800, main support .7660.
GBPUSD
• Initial gains attracted sellers on Monday, prices closing little changed and remaining within Friday’s range. Selling continued during Asia trade and the call is just cautiously bearish today.
• Pound remains resilient across the board.
• Offers atop 1.3700 remain.
FX Relative ATR Grid
Comment: Volatility remained sluggish on Monday, with a tad of action seen in NZD pairs only. This is still a sign that markets are uncertain of where to go next.
FX Relative Strength Grid
Comment: Going into Tuesday, the main signals are USD strength and JPY strength vs. AUD and NZD weakness.