Morning Report – Monday 18th January

Jon Robson, Head of Trading

“The dollar is enjoying a reprieve since making near three year lows earlier this month. This is against the backdrop of hedge funds increasing short positions to the highest level since April 2018. The greenback is still likely to weaken over the course of 2021.”

Main Headlines

Joe Biden will look to reverse many of Donald Trump’s most controversial policies with a host of executive actions in a 10 day period as soon as he enters office on Wednesday. Biden will reportedly focus his inaugural address on a message of unity and the need to quickly implement policies.

Dominic Raab, UK’s foreign secretary has said that Covid-19 restrictions will not ease until March at the earliest, and only if the vaccination programme stays on track. This has angered some Conservative MPs who want the Government to provide a roadmap out of lockdown over the next few months.

GBP

The pound is lower against both the dollar and euro in trading this morning. Business executives have urged caution from the U.K. Government after it promised sweeping post-Brexit deregulation which will create what Rishi Sunak described as a “Big Bang 2.0”. Some executives have come forward and said the Prime Minister should focus on saving businesses from the pandemic before focusing on Brexit. No major economic data is released today, but Bank of England Governor Andrew Bailey is set to speak this afternoon.

EUR

The euro is mostly unchanged against the dollar in early morning trading today. Eurozone nations increasing restrictions in January have fuelled fears that they will be plunged into a double dip recession. Vaccine rollout will help matters, but analysts predict that first-quarter growth is becoming gloomier.

USD

The dollar is slightly higher against a set of major currencies, although is lower against the Japanese Yen. US Treasury Secretary pick Janet Yellen is set to testify to the Senate Finance Committee tomorrow and will likely reaffirm the US’s commitment to letting the market determine the value of the dollar and will not seek a weaker currency for a trade advantage.

Markets

The US markets are closed today because it is the Martin Luther King holiday. Asian equities are mixed as investors are cautious despite economic data out of China showing that their recovery remains on track. Oil and gold prices edged lower.

Main Economic Data/Central Banks/Government (All times GMT)

9:00 a.m.: Italy Dec. CPI
1:30 p.m.: BOE’s Bailey speaks

Euro-Area finance ministers meet
U.S. markets closed for holiday