• Nasdaq rises 0.50%
• BOE Bailey will remain accommodative
• Nikkei 0.18% Dax 0.97%
• UST 10Y 0.672
• Oil $40
• Gold $1904/oz
• BTCUSD $10485

Asia and the EU

• No Data

North America Open

• USD Existing Home Sales 8:30

Risk appetite returned to stocks tonight especially the Nasdaq index which was up more than 0.60% in early London trade while currencies were quieter with cable sliding to fresh two month lows.

There was little fresh newsflow to drive equity trade and the move appears to be a continuation of yesterday’s short-covering rally on the close which turned Nasdaq green after a sharp selloff earlier in the day. For now, traders appear to be in wait and see mode with Chairman Powell’s semi-annual testimony to Congress the main catalyst of trading later in the day.

On the FX front, the pound drifted close to 1.2700 figure after staging a 100 pip rebound on statements from BoE’s Andrew Bailey that the central bank will remain accommodative and much like the Fed would be willing to tolerate higher inflation in order to ensure growth. The UK remains mired in COVID problems as experts now warn that the second wave of infections could reach 50,000 cases per day if strong containment measures are not put in place.

The BoE is clearly trying to calm nerves and instill confidence in the business sector but if the UK economy is forced into another hodgepodge of lockdowns the second decline in business activity will extinguish any hope of strong recovery into the year end. With both macro and idiosyncratic risks facing sterling the currency looks to be headed towards 1.2500 as the fall proceeds.

On the US calendar today the market will get a look at housing activity and wil then settle in to listen to Chair Powell who is likely to stick to the script that the Fed will remain accomodative but will not assume any additional monetary stimulus at the current time.

It’s unclear if this stance will prove supportive for further gains in equities but with Nasdaq futures having regained the 11,000 level the advantage remains with the bulls for now.