- Stock markets in the USA and Europe are mostly rising, with little obvious reason beyond renewed hope that President Biden will be able to get at least some of his infrastructure legislation passed if a piecemeal approach is taken. The legislation is believed by Goldman Sachs as likely to boost US GDP by a full percentage point if it passes, as it mandates such a large amount of federal spending.
- In the Forex market, we are seeing strength in the US dollar, in line with the long-term bullish trend in the US Dollar Index (USD). However, strong overhead resistance remains at 12257 in USX, so the greenback may not be able to rise much further. The weakest major currencies right now are the Australian and New Zealand dollars.
- The Turkish Lira has continued to strengthen following the Turkish government’s announced of emergency measures to support the Turkish Lira, which gives an effective guarantee against any depreciation in Lira savings should the currency’s decline against major currencies exceed the Lira’s rate of interest. The USD/TRY currency pair fell as low as 11 yesterday, a decline of 38% from a record peak made just a few hours previously. At the time of writing, USD/TRY seems to be finding solid support at 12. There may be a short-term opportunity to buy here as it remains unclear how much impact the rescue package will have over the longer-term, but Forex brokers are imposing such high spreads (commonly more than 2%) and overnight swap rates that trading the Turkish Lira with a retail Forex broker is probably not be worth the risk.
- The omicron coronavirus variant is continuing to spread rapidly, most notably in the USA, the UK and other European nations. Morbidity from the new variant remains unclear but it seems to transmit extremely easily. The caseload looks set to be huge, with the UK now recording almost 100,000 new cases daily. The spread is also very strong in the Netherlands (which has just implemented a full lockdown), Denmark, and Norway. Markets are spooked by the potential ability of omicron to force more lockdowns and economic disruption. Stock markets remain very prone to risk-off sentiment.
- Canadian retail sales data came in better than expected yesterday, showing a month on month increase of 1.6% compared to an anticipated increase of 1%.
- Today will bring a release of final US GDP data, which is expected to show a quarterly increase of 2.1%.
- Last week saw the a weekly rise in new confirmed coronavirus cases globally, with the highest number being recorded in one week since last August.
- It is estimated that 56.9% of the world’s population has received at least one dose of a coronavirus vaccination.
- Total confirmed new coronavirus cases worldwide stand at over 276.6 million with an average case fatality rate of 1.95%.
- The rate of new coronavirus infections appears to now be increasing most quickly in Australia, Bolivia, Canada, Denmark, Ethiopia, Finland, France, Iceland, Italy, Kenya, South Korea, Malta, Monaco, Nigeria, Norway, Portugal, Spain, Sweden, the USA, and the UK.
Forex Today: US Stocks, Dollar Advance
Adam Lemon
US and European stock markets rebound as Biden hopes to salvage infrastructure plan.