The GameStop induced volatility faded this week and that helped support equity market gains. See here for an interview we gave to the UK National Express this week. Further good news on vaccine roll outs and the effectiveness of existing vaccines further helped strong gains in the world’s major indices. The medium term picture is that record amounts of fiscal and monetary support is working in helping the global recovery from a COVID-19 induced slump. It is this narrative that is ensuring that all dips in risk markets are bought. As long as volatility remains subdued next week the hopes of a global recovery should continue to support the risk complex on any dips lower.
Other key events from the past week
- AUD: Interest Rate Statement, Feb 02. The RBA surprised markets by adding an additional $AUD100 billion to their bond purchase programme. This resulted in AUDNZD downside as the RBA diverges from a more optimistic RBNZ.
- GBP: Interest Rate Statement, Feb 04. The BoE were expected to walk the mar-ket back from expectations of negative interest rates and they did supporting the GBP out of the event. Rates remain unchanged at 0.10% as expected as did as-set purchases.
- USD: DXY breaks 91.00, Feb 03. The Dollar Index broke higher above 91.00 midweek as the recent USD bearish picture is challenged. The rise in US10 year yields helped the USD higher. Any significant improvement in the US economy opens up the potential for further US10 year yields and USD gains with it.
Key events for the coming week
- NZD: Inflation expectations, Feb 09. Employment data from New Zealand this week resulted in ANZ projecting that RBNZ will remain on hold at their next rate decision. A higher inflation print here will support that view.
- USD: Inflation date, Feb 10. A key element of recent USD strength has been hopes of a faster than expected US recovery. Any signs of rising inflation in the US will lead to expectations of bond tapering and that will lead to USD gains09?
- EUR: Double dip recession? Feb 12. Will the EURUSD keep drifting lower as the Eurozone heads towards a double dip recession and the US economy continue to show signs of strength?