This week President Biden said he would ‘go big’ on COVID stimulus, and the vaccine rollout continued without problems. Stocks soared again, with NKY hitting 30,000 for the first time in 30 years. However, by mid-week, the 10-year yield hit a one-year high, and the dollar followed it upwards. The Fed saying inflation risks were “weighted to the downside”, which put a damper on already overheated stocks (SPX is up 20% since the election) and the dollar, resulting in a flat week for DXY. GBP hit 1.40 for the first time since April 2018 and Gold made a 7-month low. Nevertheless, despite the first 3-day losing streak of 2021, DJIA only moved 0.11% the entire week, DXY only 0.16% and Oil 0.65%, so consolidation rather than collapse.
Next week is the final week of February, and the main highlight the Semiannual Monetary Policy Report to Congress by Fed Chair Powell, known as the Humphrey-Hawkins testimony named after the two senators who introduce the Act of Congress mandating the report.
Mon Feb 15
Futures were flat today as US markets remained closed. Europe was positive with FTSE rising 2.5% and DAX 0.42%.. NKY broke the 30,000 barrier for the first time in 30 years. The dollar was down very slightly, and Oil was slightly up in line. Gold was flat on the day.
Tuesday February 16
Markets briefly made new highs today before pulling back, although from a cash point of view (ignoring Monday) they were up, and bonds (yields up 7bp), Gold and JPY were sharply and noticeably down line. The dollar reflected this, up across the board. Oil was up in line.
Wednesday February 17
Markets fell further today, as bonds and JPY recovered (although Gold did not, driven down by a strong risk-off mood, as seen in NDX dropping 0.6% against a flat SPX. The drop was particularly sharp after the Fed minutes at 1900 as is often the case. USD and Oil also fell on the Fed minutes, and continued to so for the rest of the week.
Thursday February 18
A sign that the market euphoria has probably topped is that today saw the first three-day losing streak of 2021. All equity markets and Oil were down. The dollar pulled back after its two day rising streak, and of course after the Fed comments. Gold and bonds were flat.
Friday February 19
Markets attempted to rally today but pulled back into the close (leaving Europe green) with NDX underperforming, and Oil down and Gold up in line. The US 10-year yield was up 7bp again to a new 12-month high. All in all a consolidating week, for example DJIA only moved 0.11% the entire week, DXY only 0.16% and Oil 0.65%
WEEKLY PRICE MOVEMENT
A flattish week for indices, with NKY at 1.69% the best performer. The strongest pair was AUDJPY up 2.10%. Bitcoin continued to go stratospheric, hitting new highs. FANGS notably underperformed NDX as a whole.
My AUDUSD sell was a disaster, losing 1.43% and wiping out most of my profit for the year. The running total is a mere 0.24% with 5/7 wins. This week I am betting that as EURGBP is the most oversold since Mar 2015, it will bounce back. Therefore I am buying EURGBP.
Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.
NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)
- Final week of February
- Powell Humphrey-Hawkins testimony
- Heavy CB speaker roster
- US GDP second reading
Monday February 22
Not much news, but we have important speeches from UK Prime Minister Boris Johnson and ECB President Lagarde.
02:00 PBoC Interest Rate Decision (time approx.)
09:00 Germany IFO Sentiment
11:00 UK Prime Minister Boris Johnson speech
13:30 Chicago Fed National Activity Index (Jan)
13:45 ECB President Lagarde speech
20:30 Fed Bowman speech
Tuesday February 23
Today, Chair Powell gives his twice-yearly MPC report to the Senate. Otherwise US news is light.
07:00 UK UnEmp/Claimant Count/AHE (UE e5.1% p5%)
10:00 Eurozone CPI
14:00 US Housing/Home Price Indices
15:00 US Consumer Confidence(Feb)
15:00 Fed Chair Powell H-H Testimony to the Senate
17:30 BoC Governor Macklem speech
Wednesday February 24
As well as the Powell testimony, there are speeches today from Fed Brainard and Clarida.
00:30 Aus Wage Price Index
07:00 Germany GDP
15:00 Fed Chair Powell H-H Testimony to the House
15:00 US New Home Sales
Thursday February 25
EU leaders start a two-day (online) summit today to discuss COVID and their responses. Given that the EU is well behind many other countries, we might actually see some action. There is a press conference at 1700. Today is also the busiest day of the week for macro news.
00:00 EU leaders summit
07:00 Germany Gfk Consumer Confidence
10:00 Eurozone Consumer Confidence/Business Climate
10:45 ECB Lane speech
13:30 US Core PCE (QoQ)
13:30 US Jobless Claims
13:30 US Q4 Prelim GDP (e4.1% p4.0%)
13:30 US Durable/ND Capital Goods Orders (DG e1.1% p0.5%)
15:00 US Pending Home Sales (MoM)(Jan)
20:00 Fed Williams speech
23:30 Tokyo CPI
23:50 Japan Retail Sales/Ind Production
Friday February 26
The last trading day of the month may bring additional volatility, otherwise news is light.
00:00 EU leaders summit
13:30 US Core PCE (MoM and YoY)
14:45 Chicago PMI
15:00 Michigan CSI
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