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 two major central banks stand pat on their current bank rates; the RBA outlined that the board will be committed to maintaining a highly supportive monetary policy and though they don’t expect to reach unemployment or inflation targets until 2024 at the earliest they see the nation in a much better place given the economic recovery that has taken place so far. AUD/USD finished the week up just under 1% on the news after the major cross also benefited from the softer greenback heading into the weeks close. Sterling retained its strength last week following on from its central bank meeting where the asset purchase facility was also maintained at £895bln. The pushback on negative rates by BOE Gov Bailey prompted a strong rally for the currency as it finished the week up close to 1% against the Euro as price traded to levels last seen in May of last year. The pound has continued to benefit from an improved relationship with the EU alongside a strong vaccine rollout scheme which has seen more than 10mln people having received the first dose.
Looking to the week ahead, equity markets in Asia were mostly higher as the region continued to benefit from the optimistic risk tone stateside. The Nikkei 225 gained 2% after the index broke through 29,000 for the first time since 1990 on a number of earnings results. There were also a number of reports indicating that the nation could potentially lift its state of emergency in some regions.
UK Chancellor Sunak is set to extend the furlough scheme in the next budget review as the nation continues to deal with increasing Covid-19 cases albeit at a lower rate. Talks over a vaccine passport have arisen within the UK which would see those who have been vaccinated permitted to return back to normal daily life, though vaccine deployment minister Zahawi has refuted this. This comes as the nation begins to draw up plans to ease the current national lockdown which was imposed earlier this year.
Oil markets rallied to yearly highs as the recovery for the commodity complex continued. WTI Crude finished the week up over 9% bringing the YTD gain to around 20%. The asset continues to benefit from an improved risk appetite, the vaccine rollout programme along with momentum surrounding US stimulus growing. Gold finished the weak softer as demand for the safe haven asset waned on a firmer greenback. The asset broke below the $1,800 handle for the first time since November and finished the week down close to 2%.
Here is a breakdown of the High impact data releases this week.
17:00 BOE Gov Bailey Speaks
19:00 FED Chair Powell Speaks
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