Weekly Market Wrap 08-February to 12-February 2021

Marius Paun | London, UK | Senior dealer | Friday 12th February 2021

The Lunar New Year Is Upon Us

We saw inflation data coming out in the US this week showing a rise of 1.4% vs +1.5% expected for CPI. But it was the employment number which was the main concern. The US Fed Jerome Powell reiterated this week that his central bank is strongly committed to doing everything it can to promote employment but that the monetary policy will not be tightened ‘solely in response to a strong market’.

On the other hand, the US Treasury Secretary Janet Yellen said the US could reach full employment next year(!) if the $1.9 trillion stimulus package is approved. If anything, her stance on inflation, that it is ‘ the most important risk’ was not doing enough amid too many small businesses closing.

The US stocks closed mixed yesterday but not far from all-time highs with the Dow Jones touching a fresh record high.

Beijing reported that foreign direct investments into China rose 4.6% year on year in January. Its CPI dropped 0.3% vs consensus 0%. Chinese markets will now be closed for about a week, starting on Thursday, due to the Lunar New Year holiday. As a result, the Asian markets are anticipating reduced liquidity.

The European Central Bank President Christine Lagarde also commented on inflation saying that January’s rebound was expected and figures will continue to improve in the next month. She added that fiscal measures should be temporary and that significant monetary stimulus ‘remains essential’.

The UK economy shrank by 9.9% overall last year, the most since 1709, we learned on Friday, with like for like retail sales +7.1% year on year vs +4.8% previously. Prime Minister Boris Johnson gave some worrying news ‘we should start to think about Covid vaccine as a regular jab’. Nonetheless, the pound sterling remains on the offence against the US dollar trading around 1.385 going into the weekend.

Gold prices tried to push higher but found good resistance at $1855 and subsequently retraced to $1823, marginally higher for the week.

Bitcoin is again making headlines surging to over $49,000, a fresh all-time high. The driver was Tesla announced that it bought $1.5 billion worth of Bitcoin and perhaps more importantly it plans to accept payment in Bitcoin soon. In reaction, Mastercard said will start supporting select cryptocurrencies. And more are expected to follow.