Daily Market Update

Markets Await Details on U.S. Relief Bill

January 14, 2021

The U.S. Dollar is trading in mostly favorable ranges as markets await the announcement of a major relief bill and take a backseat to data and statements from financial authorities.

Overview

Joe Biden and his incoming administration plan on laying out a spending bill that could cost as much as $2.0 trillion and include payments of $2K cash directly to individuals. Senate leadership is expected to be ambitious and try to add more to it, this will have to be monitored.

Initial Jobless as well as Continuing Claims rose by more than expected as shutdowns keep affecting business activity. The figure for the start of January stands at 965K over the 789K claims expected while Continuing claims went from 5MM to 5.27MM. The buck has not moved much as a result, but it likely will see action as more Fed officials comment throughout the day, but especially chairman Jerome Powell will give a speech on the economy later that will be watched for any suggestion that the Fed is looking to hike interest rates or do a QE taper sooner rather than later, especially investors want to know if there is at all chance of tightening in any way this year.


What to Watch Today…

  • No major events scheduled for today

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EUR 

The Euro fell some following news that the Italian government alliance that held throughout 2020 is now broken. Matteo Renzi, head of “Italy Alive, decided to pull out two of his party’s ministries from the Prime Minister’s cabinet. Nevertheless, the shared currency is not sinking as Italy gets ready to head to the polls again. We will get reaction to the ECB Minutes from the December meeting as they look for cues on QE guidance. Yesterday’s commentary from ECB head Christine Lagarde did not impact flows, but she said she looks for the ECB to expand its role as needed and that she is worried about the lack of regulation of overblown crypto markets.

 

GBP 

The Pound did not make any big moves overnight, but it is worth pointing out that traders are still wondering about the Bank of England’s stance on negative interest rates. Governor Andrew Bailey said there would be a lot of issues implementing such a policy, especially since it has not done that much for Europe or Switzerland who have gone into negative territory or deposit rates and other interest. What is particularly worrisome about the U.K., economically is that the challenges from not being a member of the EU could require support from the BOE, which has exhausted all positive-territory monetary tools just in handling the divorce period.

 

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