Here are the latest developments in global markets:
FOREX: The dollar remained broadly weaker against a basket of currencies, with markets eagerly awaiting Jerome’s Powell congressional testimony for positioning on the US currency moving forward. Euro/dollar was 0.3% up and pound/dollar traded higher by 0.5%, hitting a 10-day high of 1.4069 earlier on Monday. Sterling was supported by hawkish-perceived comments by BoE Deputy Governor Dave Ramsden over the weekend, as well as the Labour party’s support for a customs union after Brexit. Meanwhile, dollar/yen was 0.1% down at 106.76. this compares to a one-week low of 106.36 recorded earlier in the day. The decline in US Treasury yields contributed to dollar weakness.
STOCKS: Bullish sentiment from Asian markets reverberated into Europe, with equities trading broadly in the green in the old continent. At 1213 GMT, the pan-European Stoxx 600 was up by 0.5%, recording a three-week high of 384.13 earlier on Monday, while the blue-chip Euro Stoxx 50 traded higher by a similar proportion. The UK’s FTSE 100, German Dax and French CAC 40 were up by 0.5%, 0.25% and 0.5% respectively. Companies continue to release quarterly earnings reports, though the markets’ attention seems to be increasingly turning to central bankers and politics. ECB President Mario Draghi will be speaking to the European Parliament’s ECON committee at 1400 GMT, while – and likely more importantly – the new Fed chief Jerome Powell will be giving his first testimony before Congress on Tuesday at 1500 GMT. Powell’s comments will be closely watched as they come at a time of increasing equity market volatility. In politics, Brexit developments, the Italian elections and the outcome of the German SPD’s vote on whether to re-enter a coalition with Chancellor Merkel’s conservatives are on the agenda as the week unfolds. Lastly, futures markets were pointing to a higher open on Wall Street; contracts on the Dow, S&P 500 and Nasdaq 100 were trading higher by 0.6%, 0.4% and 0.3% respectively.
COMMODITIES: WTI and Brent crude retreated after both reaching near three-week highs of $63.90 and $67.58 per barrel respectively. Despite the fall, both benchmarks traded not far below the aforementioned levels. Gold was 0.7% higher at around $1,338 per ounce. The dollar-denominated metal was benefitting on the back of a broadly weaker greenback and potentially the uncertainty ahead of key political and central banking developments.
Day ahead: US new home sales and New Zealand trade data due
The economic calendar is light on Monday, with some data out of the US and New Zealand attracting attention.
US new home sales for the month of January will be made public at 1500 GMT. Sales are expected to increase by 3.2% after declining by 9.3% m/m in December, this constituting their largest drop in around 1½ years. It should be mentioned though that December’s fall was likely attributed to a fading out of the boost in sales from the replacement of flood-damaged houses in parts of the US hit by the hurricanes.
New Zealand trade data – on January’s imports and exports – are scheduled for release at 2145 GMT. Kiwi/dollar last traded 0.5% higher at 0.7325. It would be interesting to see if the figures lend additional support to the pair.
