Market Quick Take - January 19, 2021
The market mood has shifted back to the positive side after a strong session in Asia overnight, with the notable exception of China. US Secretary of Treasury nominee is set for a confirmation hearing today and will tout the need for the large $1.9 trillion Biden stimulus plan. In Europe, soaring shipping costs are grabbing headlines after a tripling of container prices in just two months.
Fixed income market: the week ahead
In the United States, the rise in Treasury yields might slow down this week if violent protest escalates during the Presidential inauguration. In Europe, a political crisis in Italy, Netherlands, and Estonia may force the European Central Bank to tweak the Pandemic Emergency Purchase Programme (PEPP) favouring certain sovereigns. In our opinion, Italian BTPs continue to offer the most significant upside ahead of Thursday ECB's meeting even if the government is running the risk of earlier elections.
FX Update: USD consolidation reaching pivotal levels
The US dollar continues to consolidate to the strong side as the Biden presidency approaches, one that was meant to weaken the US dollar further, given the slim Democratic control of Congress, but with the market constantly trying to operate on far future expectations, it may simply have gotten ahead of itself. Soon, however, this consolidation will become a bit more threatening for the USD bearish case if it continues.