Weekly Market Wrap 25-January to 30-January 2021

Marius Paun | London, UK | Senior dealer | Friday 29th January 2021

The Fed Left Its Rate And Bond-Buying Program Unchanged

It’s official, Janet Yellen, ex-Fed Chair is the new US Treasury Secretary, the first woman on the job. And one of the perks is that she gets her signature on the US currency bills… Janet Louise Yellen.

We had the FOMC meeting earlier this week where the Fed left its benchmark interest rate and bond purchases unchanged as expected. Highlights from the meeting include ‘conviction’ that sustained problematic inflation is unlikely. It’s also too early to focus on tapering dates. The more immediate concern for the Fed seems to be the scenario in which the economy does not recover fully. Overall, the outlook is better despite lingering near-term risks. Importantly, banks are not experiencing the kind of losses they expected in the first place.

The US stocks reached record highs again, early in the week. However, disappointment that the US Congress might not approve any stimulus package until mid-March, coupled with supply and logistics issues regarding COVID-19 vaccine rollouts globally, took its toll on investors sentiment. All the major indices had substantial retracements since Wednesday, and are still struggling to recover going into the weekend.

Moodys reported on the EU-China agreement. They maintain that China is anticipated to reap economic benefits despite challenges for some sectors in the short term. Even more interestingly, they believe the real benefits are likely to be seen over the next 5 to 10 years. The agreement requires Beijing to open up to EU businesses.

The European Union is not happy with AstraZeneca over vaccine delays. The UK drugmaker said the initial supply to Europe is likely to be less than anticipated due to ‘reduced yields at a manufacturing site within our European supply chain”. The German economy seems to have started the new year on a back foot. An IFO economist said retail collapsed, many service providers are still affected by lockdown and he expects GDP stagnation in the first quarter.

The European Central Bank President Lagarde commented on the post-pandemic economy, which is predicted to be different. The last quarter of 2020 saw a negative GDP for eurozone but she hopes that 2021 is a year of recovery.

Meanwhile, in the UK, Prime Minister Boris Johnson said his country’s regulator will assess the Novavax coronavirus vaccine. The initial trials took place in the UK and its thought the efficacy of its Phase 3 is 89.3%. The more the merrier!.

Gold prices are on course to end the week rather flat, around the $1855 mark. A strong US dollar put the precious metal under pressure initially, but it found good support at $1830 to spark a sharp rebound. Meanwhile Bitcoin recovered from under $30,000 to over $36,000 on Friday after Elon Musk tagged the cryptocurrency in his Twitter biography (previously he laughed at the idea of cryptocurrencies having a future).