Viewpoint Kathy Lien 26_01

Tradehay.com: 26/01/2021 - 10:41

Investors around the world will watch the US market this week. This is the busiest week of the fourth quarter earnings season.

The Federal Reserve  has monetary policy announcement and we have a first look at Q4 GDP. While the Dow Jones industrial average, extending its third day's decline, the NASDAQ and the S&P 500 kept their gains. This performance reflects the market's belief that profits from major tech companies will be very positive. If they are right, this strength can turn to the Dow and push the currencies to higher trading levels. Currently, most major currencies are down on Monday, except for copperNZD .

While  FOMC and GDP are important, we expect corporate income to have a greater impact on foreign exchange and equity flows. The positive results motivate the hope that at the end of the first quarter will be stronger and the second quarter to recover. The Federal Reserve is supposed to keep interest rates unchanged but Jay Powell's outlook on the economy and comments on QE cutscan affect property movement. We believe he will repeat an upbeat rhetoric about the full outlook that his colleagues shared last week but in contrast to other Fed official, he may be quiet about the decline. less QE because it's simply too early to speak. If we are right, the Fed meeting will not risk a stock market rally. On the other hand, GDP could trigger a sell-off. It's no secret that the US is going through it. The viral cases increased, the Capitol was hit and retail sales decreased between October and December. GDP is expected to grow 4% from 33.4% in Q3 but there may be a unexpectedly stronger.

This could also be a challenging week for copper EUR. Although PMI and ZEW were better than expected, the German IFO report surprised the negative. The trading sentiment index dropped from 92.2 to 90.1 in December. This decline is not surprising as the second viral wave hit the economy last month, but a similar decline in composition. Expectations are more worrying. Everyone, from investors to central bankers, forecasts stronger growth over a six-month period, but German businesses remain pessimistic. On Thursday, we will see if EU consumers and businesses share the same pessimistic sentiment. On Friday, Germany releases its fourth quarter GDP report and we'll see the first of the two negative quarters, which will lead to a double recession.GDP growth is expected to decline, and unless there is a strong recovery in February or March, growth will remain negative for the first quarter.

The New Zealand dollar was the best performing currency of the day despite the COVID-19 case reportin the first community for months and this time, it was the South African variant, a more infectious version of the original strain. What's interesting about this exposure is that a returning traveler from Europe was quarantined for 14 days and tested negative twice before returning home. Unfortunately, she visited 30 different places in NZ before discovering positive. Soon after, Australia halted travel with New Zealand - all visitors from NZ would now be quarantined inside the hotel instead of being granted immediate access to the country. The NZD still shows strong demand ahead of the services sector PMI reports. Manufacturing activity is down at the end of the year but the services index fell below the 50 mark last month may recover in December.

Except for copper CHF devalues in EUR, other major currencies remain unchanged.Sterling bounced off its lowest lows but a country's blockade could lead to a weaker labor market report on Tuesday. We expect to see a sharp increase in the number of unemployed and a slowdown in wage growth.

Kathy Lien