Treasury yields continued to cheapen into the weekend as inflation was on the market’s mind. Stock markets moved higher at the start of the week as confidence in the global recovery strengthened. Japan Q4 GDP numbers came in higher than expected, the first BioNTech/Pfizer vaccines arrived in Japan and some suggested that the US stimulus package is still not fully priced in. Israel’s largest healthcare provider reported a 94% drop in symptomatic COVID-19 infections among 600,000 people. The JPN225 closed above 30000 for the first time since August 1990. The ASX was 0.9% higher at the close and yields jumped higher by more than 10 bp in Australia, while the 10-year JGB rate lifted 1.8 bp as reflation trades made a come back. Oil prices lifted on cold weather and some reports of Middle East tensions. USOIL is currently trading at $60.90.
The Saudi-led coalition fighting in Yemen said late on Sunday it intercepted and destroyed an explosive-laden drone fired by the Iran-aligned Houthi group toward the kingdom, state TV reported.
In FX markets both EUR and GBP strengthened against a largely weaker US Dollar, with EURUSD at 1.2139 and GBPUSD at 1.3900. Strengthening confidence in the recovery will keep central banks trying to slow the ascent in yields, and the ECB in a Valentines tweet over the weekend promised once again to keep financing conditions favourable until the crisis is over. Turkey’s lira touched 7 versus the Dollar for the first time since early August, while BTCUSD fell more than 3% to $46,992, below a record high of $49,714.66. Elon Musk tweeted on Sunday that he supports major holders of the meme-based digital currency dogecoin selling most of their coins, adding that he felt too much concentration in dogecoin was the “real issue”.
Data releases today include Eurozone trade and production data for December, which are too backward looking to have a real impact at this juncture. China, Singapore and Hong Kong are still on holiday and markets will also remain closed in the US and Canada today, which will likely make for very quiet trading conditions that could exaggerate moves.
Biggest (FX) Mover @ (07:30 GMT) CHFJPY (+0.74%) Rallied from R2 at 146.08 earlier, testing November 2019 highs. Faster MAs stalled below R2 and RSI at 80, both suggesting a possible ranging market in the next few hours. MACD histogram & signal line aligned higher and extending northwards. H1 ATR 0.150, Daily ATR 0.785.