Morning Comment from AIB

There was somewhat of a risk-off tone to start the week on markets, as the dollar strengthened, bond yields moved lower and equity markets in Europe lost ground. Currency-wise, the dollar gained 0.5% against the euro and 0.8% against sterling respectively. On bond markets the 10yr US Treasury yield fell to the lows of its recent trading range, at 1.03%. European bond yields also edged lower.

However, in the US, the S&P 500 closed up 0.4%. The downbeat tone to investor sentiment stemmed from concerns over delays in receiving vaccines in Europe, and distribution issues in the US. Investors fear that a slower than anticipated rollout of effective vaccines will mean that restrictions will remain in place for longer, and push the economic recovery back to later in the year.

Data-wise, the German Ifo missed expectations, falling to 90.1 from 92.2 which further dampened the mood in Europe. All of the above is reflected in EUR/USD opening this morning near the $1.21 handle. Meanwhile, Cable (GBP/USD) is operating back towards the $1.36 level. Elsewhere, EUR/GBP is unchanged from 24hrs previous, just below the 89p mark.

Although, overnight reports that Italian PM Conte is set to resign later today may act as a headwind for the euro. Data-wise today, the UK unemployment rate has printed below expectations, at 5.0% (vs. 5.1% f’cast) in November.

However, sterling has had a relatively muted reaction to the release so far. The only other release of note today is US consumer confidence for January. The forecast is for the index to edge higher to 89 from 88.6. Although, barring any surprises the release is unlikely to impact the dollar.

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