Dollar Bounces After Insurrection Put Down

Overview:  After the National Guard were called to put down an insurrection in Washington, DC, the dollar is having its best day in around a week.  The euro's three-day rally has been halted even though German factory orders surprised on the upside.  The greenback is firmer against all the major and most of the emerging market currencies today.  Equities are moving higher.  All the markets in the Asia Pacific but Hong Kong rallied today after the 8-day advance stalled yesterday.  Hong Kong appeared to have been dragged lower by concern that the US would delist Alibaba and Tencent.  Europe's Dow Jones Stoxx 600 gapped up to new highs but has moved to close the gap.  US shares are trading around 0.5% higher. Pressure remains in the debt markets.  The MSCI  Emerging Market equity index is at its best level since 2007.  The US 10-year benchmark is firm near 1.05%, while most sovereign 10-year bonds are up to 3-4 bp higher today.  Gold held $1900 in yesterday's slump.  It now meets resistance near previous support around $1930.   Oil prices are firm, and the February WTI contract has pushed above $51.  In early November, it was below $40.  

Asia Pacific

Japan's Prime Minister Suga has declared Tokyo and the three surrounding prefectures to be in a state of emergency that will last at least until February 7.  The emergency does not mean a stringent lockdown.  The restrictions appear less than what was imposed last year.  Still, Suga's public support has waned.  His personal conduct has been criticized.  Hopes for an early election to secure his own mandate after Abe's resignation looks to be pushed back, though an election must be held by late October.  Meanwhile, the high-frequency data showed labor cash earnings dropped 2.2% in the year through November.  This was considerably worse than the 0.9% median forecast in the Bloomberg survey and the fastest drop since last May.  It is the eighth consecutive year-over-year drop and casts a pall over the consumption outlook.  Household spending will be reported tomorrow.  It rose in October (year-over-year) for the first time since September 2019 but likely fell in November.  

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Read more by Marc on his site Marc to Market.

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