This week saw equity markets moving higher again. The S&P500 opened above 4,000 to set a fresh record high on Thursday as US ISM manufacturing PMI data hit record highs too. Combined with President Biden’s $2.25 trillion stimulus package markets returned to the default condition of buying the dip in the world’s major indices. The EUR remained weak as the third wave of COVID-19 looms over the eurozone. A key theme to watch next week will be how fast cases progress and how that may equate into further EURGBP downside.

Other key events from the past week

  • EUR: COVID case rise, Mar 31: France entered into a third national lockdown this week for four weeks as COVID-19 cases surge. If the cases continue to spread into Europe this should weigh on the euro, especially if we see further USD strength on good US economic data.
  • CAD: GDP, Mar 31: January’s GDP was good for Canada at 0.7% vs 0.5% expected. This means expectations remain that the BoC will be tapering their bond purchases, This is a CAD positive and watch out for USDCAD selling next week.
  • USD: US 10 yields fall, Mar 26: the US 10 year yields moved as high as 1.774% before pulling back as bond buyers took advantage of the higher yields. The key lev-el is 2.00%. If that level is hit this week watch out for selling in global indices.

Key events for the coming week

  • AUD: Interest Rate Statement, April 06: The RBA has pushed back against the use of negative rates, but interest rates are likely to remain low for the medium term. However, will the RBA stick to their dovish script on Tuesday?
  • CAD: Employment, April 09: Expectations are rising that the Bank of Canada will start tapering their bond purchases. Strong employment data will mean that anticipation will grow and that should support the CAD further, especially against the Euro.
  • Oil: COVID-19 third wave, April 06: A key risk for oil markets will be a third wave of COVID-19 across Europe. This will reduce demand for oil and provide a head-wind for oil.