Forex news for New York trade on January 4, 2021:
- Boris Johnson orders national lockdown starting Tuesday, schools to close
- Markit December final US PMI 57.1 vs 56.3 expected
- Canada Dec Markit PMI 57.9 vs 55.8 prior
- Fed's Evans: In Springtime will be better-positioned to know what more may be needed
- Evans: Economy should prepare for a period of very low interest rates
- Byron Wien announces his 2021 list of 10 surprises for the year
- UK reports record 58,784 new covid cases vs 55,157 yesterday
- US Nov construction spending +0.9% vs +1.0% expected
- CFTC Commitments of Traders: Canadian dollar catches a bid
Markets:
- S&P 500 down 55 points to 3701
- US 10-year yields flat at 0.913%
- Gold up $44 to $1942
- WTI crude oil down $1.14 to $47.36
- CHF leads, GBP lags
The early trade in 2021 was an extension of Q4 along the lines of USD weakness, stock market gains and higher commodities but as New York trading ramped up, that evaporated.
FX was an early clue as the commodity currencies softened. Further triggering the move were hints (and the confirmation) that the UK was heading back into a lockdown. GBP was curiously weak even before the rumours and read into that what you will but it certainly fell further afterwards, falling another 50 pips.
USD/CAD rose more than 100 pips from the bottom as oil prices reversed. That was mostly about the change in tone and worries about covid but the OPEC meeting is a factor as well. In a surprise, there is a push to keep quotas unchanged in Feb. It started out as a longshot but Saudi Arabia took up the issue and got the UAE on board. That's left only Russia as a holdout and ministers decided to wait another day to bridge the gap.
The Georgia election looms large in markets and I mainly look to that and volatility hedges as the reason for the abrupt turn in equities. The options market has become the tail that wags the dog and there was a distinct shift in odds towards Democrats over the holidays that may not have been priced in.
