Midweek Market Podcast – January 26

The markets remain nervous and volatile against the background of geopolitical risk, virus developments and the impending central bank announcements.


The Market Week – January Week 4   

The markets remain nervous and volatile against the background of geopolitical risk, virus developments and the central banks. Bonds declined and yields picked up awaiting the FOMC statement and Chair Powell’s press conference. Stock markets have boosted slightly on earnings releases amid hopes of easing virus restrictions, and the rise in oil prices, however, they hold overall in the red, vulnerable to concern over tightening central bank outlooks.

Central banks clearly are getting nervous about the risk of second round effects, but the IMF’s growth downgrades also highlighted the risks from slowing momentum in China and virus developments.

Ukraine tensions and speculation over gas supplies to Europe in the event of an escalation of tensions with Russia are weighing on sentiment. This, together with Yemen Houthis’ attack on the UAE and slowing growth in China, has added uncertainty to the overall outlook .

In FX the USDIndex holds its bid supported by the rise in Yields, rising to the 96 handle this week, while EURUSD fell from 1.1300 to test 1.1285. USDJPY moved up amid broader weakness in the Yen, breaking the 114.00 barrier. Cable has stalled at 1.3500 as the political turmoil in Westminster is still far from over with calls for the PM’s resignation getting louder. Sterling remains vulnerable to bouts of risk aversion.

US stock markets had another weak week. The USA500 spiked down to 4,220 holding for a 3rd day below 200-DMA, the USA30 holds in the 34,000 area and the USA100 was once again the weakest, testing the 7-month zone below 14,000.

Gold held at its 10-week high spiking to the $1853 level, as investors sought the safety of bullion amid the Ukraine-Russia crisis, with a stronger US Dollar weighing on the metal. $1870 remains key resistance and $1830 key support.

USOil prices continue to be supported by very tight supply, low inventories, and geopolitical tensions in Europe and the Middle East that have raised concerns about further disruption. The key psychological $85.00 a barrel has already been breached this week and next resistance is seen at the 7-year high at $87.80.

The yields remain the key driver of the market once again this week, with the US 10-Year Treasury Note breaching as high as 1.78%, as markets remain extremely volatile amid conflicting dynamics.

Click here to view the economic calendar

Stuart Cowell

Head Market Analyst

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