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January 14, 2021

Traders focus on the long-term outlook for economies! Nikkei 225: +1.04%

Europe extending and tightening lockdowns

Europe extending and tightening lockdowns

On Wednesday, several European countries decided to either extend or tighten lockdowns that have been in place due to the coronavirus pandemic picking up momentum on the continent. Italy has decided to extend the state of emergency to the end of April, with Switzerland closing shops selling nonessential supplies, in draconian measures to fight the virus. Germany has decided to impose even stricter entry controls to hamper a new variant from entering the country. The Netherlands has extended its lockdown till February 9 and is currently considering a curfew as well. Meanwhile, the French have started debating the idea of an earlier curfew, with a potential eye on summer for improvement.

As the vaccines are being rolled out across the continent, many people are concerned about the lack of momentum. The infections currently show no signs of slowing down, so with the combination of a fumbled rollout and a very contagious virus, this has the EU shedding its own economy down.

US House nearing impeachment of Trump

US House nearing impeachment of Trump

The United States House of Representatives spent most of the day on Wednesday focusing on the impeachment of President Trump, something that the Democrat-led body has been trying to do for four years. At this point, though, it is more or less just political theatre as Trump’s term ends in just a few days. Mitch McConnell, the Republican majority leader in the Senate, has already rebuffed the idea of a flash trial happening in the next few days, meaning that this will probably go nowhere while Donald Trump is still in office.

That being said, there are talks about a possible impeachment after his term is up, which might be a ploy to keep him from running for office again. The biggest problem that this could bring up is the fact that if you can impeach a former president, then you certainly can impeach a former vice president. There is already talk of a tit-for-tat type of situation to punish Joe Biden going back to when he admitted in a televised press conference in front of the World Economic Forum that he held up foreign aid to Ukraine until the Ukrainian president fired the prosecutor investigating his son Hunter. If that is the case, Biden may be impeached in just two years. In other words, this is a can of worms that while on the surface probably does not go anywhere, if it were to be pressed forward, it could lead to a very messy few years for what is already disastrous politics in America.

CPI rises ever so slightly for December

CPI rises ever so slightly for December

The Consumer Price Index for the month of December came out at an increase of 0.4%, rising 1.4% year on year. However, one of the main reasons that the CPI rose was due to gasoline prices, and as a result, inflation is nowhere to be seen. This gives the green light for more spending in the United States, which could continue to put downward pressure on the greenback. However, traders are starting to become concerned about a rebound in the greenback due to rising yields in the 10-year note. The break above 1% recently has seen a bit of a correction in the dollar, leading to a certain amount of strength. However, the cyclical bet is still on the weaker greenback as stimulus and spending will probably reach levels previously unseen.

Global Equity Markets

Global Equity Markets

Stock markets were generally positive around the world, with the lone exception being the FTSE 100 as it lost seven basis points. That being said, both Germany and France were up roughly ¼ of a per cent, while the Nikkei 225 was the global leader, gaining 1.04% for the day. At midday in the United States, the S&P 500 was up 24 basis points.

Index Change
FTSE100

FTSE100

-0.07

DAX

DAX

0.21

CAC40

CAC40

0.31

Nikkei 225

Nikkei 225

1.04

S&P 500

S&P 500

0.24

Currencies

Currencies

Currency traders continue to see value in the US dollar, albeit from extraordinarily low levels. The Euro lost 4/10 of a per cent, while the British pound lost ¼ of a per cent. The dollar gained 15 basis points against the Japanese yen, while the Australian dollar was particularly sensitive to US dollar strength dropping 42 basis points, although it should be said that the Aussie was probably a bit overextended, to begin with.

Index Change
EUR/USD

EUR/USD

-0.3843

GBP/USD

GBP/USD

-0.2584

USD/JPY

USD/JPY

0.1561

AUD/USD

AUD/USD

-0.4223

Commodities

Commodities

Commodity traders were relatively constructive during the trading session on Wednesday, with the exception of the Brent market, mainly due to the fact that there is a growing sense of concern about true demand when it comes to petroleum. Both gold and silver were higher for the session, up three quarters of a per cent and half of a per cent, respectively. Platinum was the big winners, gaining 3.7%, while copper was up 6/10 of a per cent.

Index Change
Gold

Gold

0.74

Silver

Silver

0.49

Brent

Brent

-0.58

Platinum

Platinum

3.70

Copper

Copper

0.60

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