Weekly Market Wrap 18-January to 22-January 2021

Marius Paun | London, UK | Senior dealer | Friday 22nd January 2021

Joe Biden Sworn In As President Of The United States  

We had a busy week for the markets with Joe Biden being sworn in as the 46th President of the United States. He was quick to act, signing a number of Executive Orders; re-joining the Paris Accord on climate change, re-joining the World Health Organization, increasing the minimum wage to $15 per hour. The act which probably caused probably most controversy was revoking the XL Keystone pipeline permit, which hit hard Alberta province in Canada. Nevertheless, the major US indices posted record closing prices yet again.

China released its fourth-quarter GDP showing a gain of 6.5% vs expectations for ‘only 6.2%’ and compared with +4.9% in the previous quarter. Year to date the Chinese GDP was 2.3% higher. Although that represented the slowest growth rate in 40 years it confirmed that China was the only major economy to expand last year.

China’s industrial production for December 2020 also increased, 7.3% vs 6.9% consensus,  which means 2.3% year to date. These were very good figures considering all the challenges faced last year.

The first gut check for the newly installed US President did not come from China, Russia or Iran but…………… an old ally. The media in the European Union reported about plans to limit the ‘reliance on the US dollar’. Measures could include tighter controls on takeovers and rules to boost the use of the euro in the financial markets. The plans also emphasized the vulnerability of the EU to US sanctions. Hmmm!!!

Elsewhere, Bloomberg reported the European Central Bank is buying bonds thus trying to limit the difference in bonds yields of the weakest and strongest economies.  We also had the ECB meeting, where the key interest rates were left unchanged. It was a dull affair, pretty much dubbed a non-event.

Back in the UK, Prime Minister Boris Johnson said it was too early to say when restrictions will be lifted, but added the case count is starting to fall in the recent days. However, the death count is still rising, posting a record 1,820 mid-week, putting further pressure on the health system. On Friday, PM Johnson said there is no evidence the new Covid variant may be more deadly than the original strain which would explain the bigger number of casualties.

Gold prices recovered somewhat from the previous two weeks selloff. They gained $44 from a low of $1810 to trade around $1854 going into the weekend. Meanwhile, the volatility swings in Bitcoin still remain. The main cryptocurrency fell sharply to 28,760 earlier in the week but recovered to 33,000 on Friday afternoon.