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Market Update
Risk-on trading sentiment is starting to creep into financial markets on Thursday after the US House of Representatives agreed to fast track the Biden administration $1.9 trillion stimulus bill. US futures are starting to move higher on the stimulus news, and Asian equity markets are notably firmer intraday.
Yesterday’s impressive ADP jobs report showed that the United States economy added 177,000 private sector jobs to the economy during the month of January. The headline number was a huge beat, as market consensus was for a private sector jobs increase by around 50,000.
These two positive events certainly helping to encourage a move away from safe-haven asset classes, and also encouraging the notion that Friday’s Non-farm payrolls job report could overshoot market expectations.
With markets in a more buoyant mood, the US dollar index has been edging higher against the euro, British pound, and Japanese yen this morning. The reason the US dollar is catching a bid is due to the potential growth prospects of the US economy.
Traders and investors are starting to bet that the United States economy will outpace the eurozone, Japanese, and UK economy in terms of growth prospects once the $1.9 trillion package hits the US economy.
Gold and silver are notable weaker this morning. Gold is having a bad session and is trading down by around $10.00. Silver is also trading around the lows of the weak and is edging closer to the $26.00 support area. Strength in the greenback and risk-on sentiment are typically not supportive for gold and silver prices.
At current levels, silver is trading in negative territory for the month and is close to $4.00 in the red from Monday’s trading high. Copper is performing better than both gold and silver due to optimism over US stimulus.
Both WTI and Brent oil are holding onto recent gains after OPEC agreed to maintain its current policy stance. The members of OPEC did not reference any policy change, hence the market took this as a sign that supply cuts will remain in place.
Both the FTSE 100 and the German DAX are set for a muted market open on Thursday. The main story in European equity markets at the moment is the ITA40, as the Draghi effect helps to lift Italian stock markets.
Former ECB President Mario Draghi has been asked to form a coalition government in Italy. Markets are betting that having Draghi at the helm of the Italian government would help steer the nations fiscal prospects in a positive direction.
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The economic calendar is set to be dominated by the Bank of England policy meeting later today. Traders will be watching intently to see the findings of the central banks recent investigation into negative interest rates.
While no major changes are expected today from the Bank of England, the British pound and the FTSE 100 are likely to incur a bout of volatility if the central bank strays from the expected policy script.
Retail sales data from the eurozone economy could also be a market mover for the euro currency later today. Market expectations are for a big improvement from the previous month, with a +1.7% increase month-on-month.
Looking to the US trading session, the release of weekly jobless data and the continuation of earnings season is set to dominate. Traders and investors are likely to be focused on the US stimulus package and also the monthly jobs report on Friday.
