Forex news from the European trading session - 6 January 2021
Headlines:
- EMA recommends Moderna coronavirus vaccine for authorisation in EU
- US MBA mortgage applications w.e. 1 January +1.7% vs -5.8% prior
- UK December final services PMI 49.4 vs 49.9 prelim
- Ossoff - 50.2%, Perdue - 49.8% based on latest count
- Eurozone December final services PMI 46.4 vs 47.3 prelim
- Saxony December CPI 0.0% vs +0.1% y/y prior
- The market is keeping the focus on stimulus, for now at least
- France December preliminary CPI +0.2% vs +0.4% m/m expected
- Warnock (D) unseats Loeffler (R) in Georgia special Senate race - NBC News
- 10-year Treasury yields nudges above 1%, first time since March last year
- Germany reports 21,237 new coronavirus cases in latest update today
- Tokyo reportedly to post record of over 1,500 daily new coronavirus cases
Markets:
- NZD leads, JPY lags on the day
- European equities higher; S&P 500 futures down 0.1%, Dow futures up 0.4%
- US 10-year yields up 6 bps to 1.015%
- Gold down 0.1% to $1,947.80
- WTI up 0.2% to $50.05
- Bitcoin up 3.3% to $34,940
The key development in the market is that US 10-year yields hit 1% for the first time since March last year in anticipation of a Democratic sweep of the Georgia runoffs.
It seems that investors are largely focused on the reflation trade i.e. stimulus, as yields jumped alongside value stocks as tech stumbled heavily during the session.
European equities saw some push and pull before settling higher as the market isn't too fazed by the jump higher in Treasury yields - at least for now.
Nasdaq futures declined by 2% as tech stocks slipped up while Dow futures and Russell 2000 futures led gains in the equities space ahead of US trading.
Despite the push higher in yields, the dollar failed to take in any comfort as it fell further across the board alongside the Japanese yen.
EUR/USD pushed higher from 1.2300 to 1.2350 while AUD/USD climbed from 0.7760 to its highest levels since March 2018 around 0.7820.
Elsewhere, gold had a bit of a choppy session as it pared early losses to push up to $1,959 before easing back to just under $1,950 currently.
As things stand, a 'blue wave' seems imminent and the market is growing rather comfortable with the outcome as there isn't much tantrum amid the sharp rise in yields.
We'll see if Wall Street will take things in stride later but if this isn't enough to bolster the dollar (even if just for a brief period), then things do look pretty dire for the greenback.
