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Intermarket:
- SP Futures 3837 (-0.14%)
- EUSTXX 3583 (-0.17%)
- Crude Oil 52.98 (+0.71%)
- US 10YR 1.04 (-0.35%)
- EurUsd 1.2164 (+0.03%)
- UsdJpy 103.65 (+0.04%)
- DAX 13856 (-0.20%)
Risk sentiment stalled ahead of today’s FOMC meeting even as the IMF raised its 2021 global growth forecast from 5.2% to 5.5%. The upgrade was mainly due to the US (5.1% versus 3.1% previously) whereas Euro-area was cut by 1 percentage point to 4.2% and UK by 1.4 percentage points to 4.5%. Meanwhile, Covid cases crossed 100 million globally, with the UK surpassing 100k deaths, and Japan is likely to extend its state of emergency.
On the US earnings front, Microsoft beat forecast with a 17% rise in annualised revenues. AMD and Texas Instruments were also upbeat on sales, whereas Starbucks’s same-store sales fell by a worse-than-expected 5%. Other gainers included 3M, J&J and GameStop. Market attention now turns to Apple, Facebook and Tesla.
Looking Ahead: today we get the FOMC decision, where the statement will be key. Expectations are for Powell to acknowledge the recent softening in US economic data, especially on the labour market front and reiterate the need for continued policy accommodation amid the rising Covid scourge.
Matters that Matter:
• Global COVID-19 cases surpass 100 million as nations tackle vaccine shortages
• Democrats may move forward on coronavirus aid without Republicans, says Schumer
• Australian consumer prices lifted by taxes, COVID stimulus, trimmed mean CPI stays at record low
• China money rates hit 21-month high on holiday demand, policy tightening worries
• UK retailers report biggest annual price falls since May
• Conte quits as Italy’s PM in tactical bid to build new majority
• Moody’s: EU-China pact strengthens ties, posing mixed sectoral impact and wide geopolitical implications; China will likely gain political and economic benefits but short-term challenges are likely for some sectors in the near-term; EU-China pact requires China to further open up to EU businesses in array of sectors, potential credit positive for EU and its companies; economic benefits from the agreement for China will be more likely in next 5-10 years
Majors 1-Day View:
USDJPY
- The absence of clear signals in the past 2 weeks kept signals neutral for this week between 103.20s and 104.00. Trading this week has shown little direction and requires the same neutral stance even at the daily level.
- Little direction, USD on hold, yields lower.
- Offers reported around 104.00, bids reported from 103.50
EURUSD
• With intraday losses attracting buyers on Tuesday, evident downside rejection has materialised and signals have improved marginally. As such, the outlook for Wednesday is cautiously bullish.
• Next move depends on FOMC most likely.
•Offers reported between 1.2180/2200
AUDUSD
• Prices posted a bullish engulfing on Tuesday, signals consequently improving. However, until last week’s range is broken, the stance is to remain just cautiously bullish.
• Little impact from stronger CPI.
• Offers ahead of .7800, main support .7660.
GBPUSD
• Initial losses of ¾ Big Fig were reversed, buyers posting a rally of 1 ½ Big Figs. The resulting bullish engulfing leaves signals positive for Wednesday.
• Pound remains resilient across the board.
• Lockdowns seriously impacting retail sector.
FX Relative ATR Grid
Comment: The low volatility is starting to become unsustainable and ranges are starting to expand, despite most currencies still being within prior week ranges. FOMC is likely key to directionality.
FX Relative Strength Grid
Comment: Going into Wednesday, rangebound conditions remain on most pairs. The main signals are JPY and USD weakness vs Kiwi strength.