Trading Week Ahead

Last week we saw flat to a mixed week from the majors to the USD. The EUR was an expectation as it rallied strongly mid-week after the ECB rates hold and rates statement. The ECB confirmed that risks remain and things remain clouded in the near term due to the continuing impact of COVID19. At this stage, the ECB advised it wasn’t a time to discuss tapering. Another positive for the EUR was Friday’s PMI data that showed French services increased for the first time since AUG20, and German manufacturing increased. Eurozone services and manufacturing PMI data beat expectations as did UK data, looser pandemic restrictions were seen to help drive the fastest private-sector growth since 2013.

Big News Affected the Markets

The Bank of Canada was another market mover last week when they met. The BOC sent the CAD to 10-month highs after news hit that they cut Q/E purchases to CAD 3 billion a week. The USDCAD was on a bit of a roll before the BOC meeting jumping to 1.2652, after the tapering update price dropped 1.24% from its high ending up back below 1.2500.

Australian retails sales data surprised climbing to 1.4% but this did little to drive the AUD. New Zealand CPI came in as expected at 0.8%. The NZD finished mainly flat to the JPY and had a decent week to the USD.

Stock indexes took a breather last week after several weeks of gains despite Dow was close to a new record. One of the new factors that came into the market was the new tax plan released by president Joe Biden.

President Biden will seek an increase in the tax on capital gains to 39.6% for those Americans earning more than $1 million, this raises taxes on millionaire investors to fund education and other spending priorities as part of an effort to overhaul the U.S. economy. The president is expected to release the proposal formally next week as a way to fund spending in the upcoming American Families Plan. – CNBC

This news looks to have shocked the equity market to a degree. Markets have been sitting very pretty since 2020 on one of the best runs in long while. Investors and traders will now be watching this development closely. If it does have an overly negative impact could this start to form cracks in the bull market?

Oil fell into the red after a decent start to the week. US stockpiles surprised coming in at 0.6M above estimates. OPEC is looking to gradually curb output cuts as demand concerns continue. Gold rallied for the third straight week of buyers retesting 1798.

Bitcoin – The Bigger it Comes, the Harder it Falls

Bitcoin returned to the spotlight last week but not from a record-breaking point of view. Price tumbled trading close to 24% lower at its lows as profit-taking and regulation worries emerged. Over 200 billion was wiped off the cryptocurrency market on Friday alone. Bitcoin traded below $50,000 USD for the first time since March. The market was dramatically overextended. The big question now will be, “Is this just a short-term correction or the start of something bigger?”

Looking Ahead

This week traders will be looking at Biden’s new tax plan and how that could impact equity markets and if momentum shifts how that could influence the USD. Bitcoin’s fall will be a factor this week.

News wise Thursday’s FOMC meeting looks to be the key event of the week. The fund’s rate is expected to remain unchanged but the meat will be in the statement. No changes of surprises in the current bond-buying? The BOJ outlook report and monetary policy are due on Tuesday. Interest remains around the BOJ ETF purchases.

Other points of interest will be OPEC meetings, Australian CPI, and US Advanced GDP which is expected to increase to 6%

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.