Euro Rally Stalls While Brexit Concerns Trip Sterling


Overview:  The selling pressure that drove the dollar lower yesterday has abated, and the greenback is paring yesterday's loss, though the dollar-bloc currencies are showing some resilience.  EC negotiator Barnier briefed ministers that the same three issues that have bedeviled the trade talks with the UK remain unresolved (fisheries, level playing field, and a conflict resolution mechanism).  Sterling (FXB) has retreated a full cent from the high posted near $1.3440.  Emerging market currencies are mixed, leaving the JP Morgan Emerging Market Currency Index slightly softer after posting its biggest gain in a month yesterday (~0.7%).  US stocks raced to records yesterday, but the spill-over effect was limited.  Asia Pacific bourses were mixed, though Korea's Kospi led the advanced (~1.5%), while Japan's Nikkei edged to a new high.  Europe's Dow Jones Stoxx 600 is a little softer, as are US shares.  The bond market is quieter after yesterday's US yield surge ostensibly on the back of renewed hopes of a fiscal package ahead of year-end.  The Asia Pacific yields played catch-up, while European yields are little changed, with peripheral yields a bit lower.  The US 10-year benchmark is around 0.92% (SPTL).  Gold is continuing to recover and, after being pushed below $1800 at the start of the week, is near $1825 (GLD).  The first notable retracement objective is near $1840.  Oil has steadying after the January WTI slipped to briefly below $44 a barrel amid ideas that the Saudis and UAE will reach an agreement (OIL).  

Asia Pacific

Despite talk in some quarters that President-elect Biden would unilaterally drop the controversial tariffs that the Trump administration levied on China, this was never a particularly likely scenario.  It is not politically realistic, and Biden confirmed this.  According to press reports, the new administration will fully review the existing agreement.   It seems quite clear that the US confrontation with China is bipartisan in nature, even if the tactics may vary.  The Biden team is more interested in working with allies.  

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Read more by Marc on his site Marc to Market.

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