Forex news for Asia-Pacific trading on February 7, 2021:
- Oxford/AstraZeneca vaccines not effective against South African variant - study
- Japan December current account ¥1165 vs ¥1083B exp
- Japan January bank lending +6.1% y/y vs +6.2% expected
- Fitch affirms Japan at 'A' with a negative outlook
- PBOC sets yuan mid-point at 6.4678 vs last close at 6.4664
- Yellen says US could reach full employment next year with $1.9T stimulus package
- Cuban revolution: Massive change announced for private business ownership
- New Zealand on holiday
- Tampa Bay wins Superbowl in a rout
Markets:
- Brent crude up 57-cents to $59.91
- Gold down $3 to $1811
- US 10-year yields up 2.4 bps to 1.19%
- Nikkei 225 up 1.9% to highest since 1990
There were two battling narratives going into the day. One is the weekend news about the lack of vaccine efficacy against the South African covid variant. That was competing with Congress forging forward on a huge $1.9 trillion stimulus package. At first, there was a risk averse tone but it reversed as Tokyo arrived and bid up shares in a big way.
The result was that early dips in commodity currencies and cable were washed away and USD/JPY made some headway to the upside.
On the flipside, the euro is looking more like a funding currency for the next cycle and less like a place to find value. EUR/USD drifted lower after Friday's rebound and that's going to be a spot to watch.
Overall trade was seemingly subdued but with Treasuries pushing some important levels (2% in 30s and 1.20% in 10s) and oil nearing $60, there's a lot of talk about inflation. Summers and Blanchard were taking on all comers over the weekend and there are plenty of people in markets who are sympathetic. The Fed is going to be put in a tough spot before long.
