Asian equity markets were mixed heading into the week as the region traded tepidly ahead of what is set to be a busy week of Central bank announcements with the Fed, BoE and BoJ all set to take centre stage. Last week saw the greenback trade indecisively as the DXY traded above the 92.00 handle briefly, before finishing the week with a strong Doji. The Canadian dollar was the top performer for the week as the commodity currency benefited from a strong labour market report which saw the unemployment rate trend lower to 8.2%. In addition to this, market participants digested comments from Governor Macklem as the central bank hosted its second-rate statement for the year. CAD/JPY traded to its best levels since 2018 as the cross eclipsed the 87.00 handle. Optimism continued to cycle across markets as US President Biden signed the Covid-19 relief bill into law marking a significant turning point in the nations battle against the virus which has killed more than 500,000 Americans. 

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Going into the week ahead, the US will host China in what is set to be their first significant meeting since President Biden took office. The meeting will see US Secretary of State Blinken and National Security Adviser Sullivan meet with Foreign Minister Wang Yi and other officials. The meeting will most likely be an opportunity for either side to size each other up in what could potentially set the tone for any talks or developments moving forward. As of now, it has been reported that President Biden will not be looking to remove the tariffs imposed on the nation by the former presidential administration.

Asian markets traded cautiously as market participants continued to digest the increase in US yields early last week which underpinned some of the initial strength seen for the greenback and triggered US equities to meander away from all-time highs. Economic data was somewhat strong with better-than-expected retail sales and PMI’s released in line with expectations in the US. The week ahead will see a monetary policy meeting in New Zealand as well as speeches from FED Chair Jerome Powell who is set to testify on the semi-annual monetary policy report before the House Financial Services Committee.

Going into the week ahead, Japan’s economy expanded by more than expected in the fourth quarter, further extending the recovery from its worst recession post war. As a result, the Nikkei 225 finished the session up close to 2% breaking through the 30,000 handle; marking the first breach of the level in more than three decades. Company shares have continued to report positive earnings and with the nation also set to start vaccinations later on this week, it bodes well for market participants and investors. Conversely the Japanese Yen was amongst the weaker currencies starting the session this week as an upbeat risk tone swept across markets on growing optimism surrounding the Pandemic. Flows into safe havens were capped as Gold also remained subdued on lack of haven demand; prices have since retreated from the $1,850/oz level which was tested last week.

Last week saw the Dollar rally and press to multi month highs against a basket of currencies as a positive upbeat risk tone took centre stage. US equity markets continued to trade at all-time highs as market participants continued to digest positive earnings, progress in stimulus talks and positive economic data. As the week drew to a close, a weaker than expected Jobs report led to dollar strength cooling off as EUR/USD reclaimed the 1.2000 handle.

Last week saw the FED leave rates unchanged as expected whilst maintaining its asset purchases at the current rate. Fed Chair Powell concluded that household spending on goods has moderated whilst the labour market participation continues to remain below pandemic levels weighing on economic activity and job creation. The Fed also outlined that monetary policy is expected to remain accommodative until employment and inflation objectives have been achieved. Market participants will look ahead to the NFP jobs data to provide further insight on the state of the labour market as an additional 55,000 jobs are forecasted to have been added in the past month.