In the first trading week of the year, the market started in a positive mood, further setting the Dollar and safe-havens backward. Wallstreet hit fresh record highs. Meanwhile, Ethereum, Bitcoin, and the Crypto market continue to steal the spotlight.
Major Risk Drivers
Covid & Vaccines
The virus continues to spread quickly in 2021. The new UK variant forced lockdowns during the festive period. There are now rising cases in the UK, US, Australia, Japan, Euro-zone and some African countries.
As rising cases persist, governments have increased the rate of vaccine deployment. However, reports suggest the distribution rate is slower than the current spread rate. At the current rate, hospitals will soon become overwhelm. Vaccine companies are set to speed up production. Concerns now on the rise as to whether the virus and its variants will be contained before the end of this quarter.
Geo-politics & Stimulus
Geopolitics risk sentiment is quite low at the start of the year. The US will start distributing the new stimulus package after President Trump approved the $900 billion aid in the last days of 2020. Brexit deal was also agreed before the December 31 deadline which is quite positive for the market mood and particularly the British Pound.
However, traders should watch for outcomes coming from the US Politics in the coming days ahead of the January 20 Biden inauguration. President Trump is still making efforts to upturn the November 2020 election result. If this becomes more serious than expected, risk-off will creep in.
Gold resumes flow with risk-on and shooting over 1.6% toward 1940. WTI and Brent closing up on $50 and $53 – over 3% in 2021 already.
The Dollar remains on the backfoot – losing more ground across the board. DXY dips below 90. Meanwhile, Riskier FX – AUD, CAD & NZD are the biggest FX gainers against the Dollar early in the London session.
The cryptos continue to seize the spotlight. Bitcoin hit $34,000 after spiking above its previous all-time high in mid-December. Minor corrective dips ensue on Monday across the major cryptos apart from ETH which initially surged above $1,100 before shedding a large part. XRP still remains on the backfoot while LTC hits highest since April 2018.
The Week Ahead
Looking forward to this week, attention will be on the risk drivers especially the US politics and Covid/Vaccines reports. Aside from this, the spotlight will be on macroeconomics including BOE and FOMC mid-week before US and CAD employment data on Friday. Today, traders can pay attention to the OPEC+ meeting for opportunities in the Oil market and CAD FX pairs.
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