Forex-novosti i prognoze od 26-01-2021

• Inflation could exceed 2% temporarily under ECB goal
• ECB ready with all powers, including PEPP flexibility

The latest survey from the Federal Reserve Bank of Richmond revealed on Tuesday that the U.S. fifth district's manufacturing activity continued to expand in January 2021, albeit at a slower pace than in December 2020.

According to the report, the composite manufacturing index dropped from 19 in December to 14 in January, the lowest since July, but remained in expansionary territory, as all three component indexes – shipments (at 10 in January, down from 12 in December), new orders (at 12 in January, down from 24 in December), and employment (at 23 in January, down from 20 in December) - posted positive readings. Manufacturers also reported that vendor lead times lengthened, with a corresponding index climbing from 31 in December to 39, its highest level since January 1996. Overall, manufacturers were optimistic that conditions would continue to improve in the coming months, the report added.

The Conference Board announced on Tuesday its U.S. consumer confidence rose 2.2 points to 89.3 in January 2021 from 87.1 in December 2020.

Economists had expected consumer confidence to come in at 89.0.

December’s consumer confidence reading was revised down from originally estimated 88.6.

The survey showed that the expectations index rose from 87.0 last month to 92.5 this month. Meanwhile, the present situation index fell from 87.2 in December to 84.4.

“Consumers’ appraisal of present-day conditions weakened further in January, with COVID-19 still the major suppressor,” noted Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ expectations for the economy and jobs, however, advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future. In addition, the percent of consumers who said they intend to purchase a home in the next six months improved, suggesting that the pace of home sales should remain robust in early 2021.”

• Projects 2022 global growth of 4.1 percent
• Estimates 2020 global growth contraction at -3.5 percent, 0.9 percentage point higher than projected in its previous forecast 
• Says renewed waves and new variants of the virus pose "exceptional uncertainty" about the outlook
• Notes that strength of recovery is seen to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis
• Forecasts global trade volumes to grow about 8 percent in 2021, before moderating to 6 percent in 2022, following a 9.6 percent decline in 2020 
• Sees U.S. growth of 5.1 percent in 2021 (up from 3.1 percent seen in October) and 2.5 percent in 2022 (down from 2.9 percent in October)
• Sees China's growth of 8.1 percent in 2021 (down from 8.2 percent in October) and 5.6 percent in 2022 (up from 5.8 percent in October)."

U.S. stock-index futures rose slightly on Tuesday, as investors assessed a big batch of earnings reports and weighted the prospects of Biden’s $1.9 trillion coronavirus relief plan, while awaiting the beginning of a two-day policy meeting of the U.S. Federal Reserve later today.

Global Stocks:

S&P reported on Tuesday its Case-Shiller Home Price Index, which tracks home prices in 20 U.S. metropolitan areas, rose 9.1 percent y-o-y in October, following a revised 8.0 percent y-o-y jump in October (originally a 7.9 percent y-o-y surge). This was the biggest annual gain in house prices since June 2014.

Economists had expected a climb of 8.6 percent y-o-y.

Phoenix (+13.8 percent y-o-y), Seattle (+12.7 percent y-o-y) and San Diego (+12.3 percent y-o-y) recorded the highest y-o-y advances among the 19 cities (excluding Detroit) in November. All 19 cities reported greater price gains in the year ending November versus the year ending October.

Meanwhile, the S&P/Case-Shiller U.S. National Home Price Index, which measures all nine U.S. census divisions, surged 9.5 percent y-o-y in November, following 8.4 percent y-o-y jump in the previous month.

“The trend of accelerating home prices that began in June 2020 has now reached its sixth month with November’s emphatic report,” noted Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices. “As COVID-related restrictions began to grip the economy last spring, their effect on housing prices was unclear. Price growth decelerated in May and June before beginning a steady climb upward. November’s report continues that acceleration in a particularly impressive manner.”

(company / ticker / price / change ($/%) / volume)

Freeport-McMoRan (FCX) reported Q4 FY 2020 earnings of $0.39 per share (versus $0.02 per share in Q4 FY 2019), missing analysts’ consensus estimate of $0.40 per share.

The company’s quarterly revenues amounted to $4.495 bln (+14.9% y/y), beating analysts’ consensus estimate of $4.330 bln.

FCX fell to $28.74 (-0.83%) in pre-market trading.

USD traded little changed against its major rivals in the European session on Tuesday amid heightened concerns about possible delays to Biden's coronavirus relief plan.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, edged down 0.09% to 90.31.

Biden's $1.9 trillion coronavirus relief bill faced obstacles in the Senate, as several Republican lawmakers expressed opposition about the size of the proposed measures. As Democrats, who hold only a slim majority in the Senate, are still trying to convince Republicans of the need for more stimulus, questions raised over when and in what volume a package will be approved. President Joe Biden stated on Monday that he was "open to negotiating" terms of his coronavirus relief plan.

In addition, market participants are awaiting the beginning of a two-day policy meeting of the U.S. Federal Reserve, which is to kick off later today. The Fed is not expected to make any changes to its policy stance at the meeting. Investors wait for an update from the Bank's governor Jerome Powell on the economic outlook.

James Smith, a Developed Market economist at ING, notes that the UK jobs market stabilised towards the end of 2020 after months of turbulence but there's a risk we see the jobless rate rise towards the 6-7% region if the government support is removed before all sectors have fully reopened. 

"The latest UK data offers hope that the jobs market stabilised towards the end of 2020, after a turbulent autumn. Unemployment rose through September and October ahead of the originally planned end-date for the furlough scheme. While the policy was ultimately extended, redundancies rose and peaked in September as firms cut their workforce in anticipation of reduced wage subsidies."

"The better news is that real-time payrolls data tentatively suggests that employment has since stabilised, after consistent month-on-month falls. While businesses in the hardest-hit sectors are reporting financial difficulties (roughly half of hospitality firms have less than three months of cash reserves, according to ONS survey data), the extended furlough scheme appears to be succeeding in limiting job losses so far."

"However, the scheme is currently due to expire in April. The question is whether the policy is extended further, given that aspects of the current lockdown are likely to last longer, or whether the government reverts to offering subsidies only where staff are brought back on a part-time basis (in other words, no longer supporting staff who cannot work at all)."

"The risk is that we will see a further rise in unemployment, if support is tapered before the hardest hit sectors are allowed to open."

"The disruption stemming from the new UK-EU deal will also inevitably put pressure on jobs as businesses continue to grapple with the permanent increase in costs and trade barriers. While there is plenty of uncertainty, it’s not inconceivable that the unemployment rate could reach the 6-7% region later this year."

Verizon (VZ) reported Q4 FY 2020 earnings of $1.21 per share (versus $1.13 per share in Q4 FY 2019), beating analysts’ consensus estimate of $1.17 per share.

The company’s quarterly revenues amounted to $34.700 bln (-0.2% y/y), roughly in line with analysts’ consensus estimate of $34.474 bln.

VZ fell to $57.95 (-0.80%) in pre-market trading.

Raytheon Technologies (RTX) reported Q4 FY 2020 earnings of $0.74 per share (versus $1.16 per share in Q4 FY 2019), beating analysts’ consensus estimate of $0.69 per share.

The company’s quarterly revenues amounted to $16.419 bln (-1.0% y/y), beating analysts’ consensus estimate of $16.075 bln.

RTX rose to $68.10 (+2.75%) in pre-market trading.

• WTO is the basis for fair trade
• We welcome U.S. rejoining World Health Organization after Joe Biden's election
• Way out of pandemic won't be as short as expected
• A fair distribution of COVID-19 vaccines is important
• We hope to continue Organisation for Economic Co-operation and Development (OECD) work on minimum taxation of digital companies with new U.S. administration

General Electric (GE) reported Q4 FY 2020 earnings of $0.08 per share (versus $0.21 per share in Q4 FY 2019), missing analysts’ consensus estimate of $0.09 per share.

The company’s quarterly revenues amounted to $21.928 bln (-16.4% y/y), beating analysts’ consensus estimate of $21.620 bln.

The company also issued downside guidance for FY 2021, projecting EPS of $0.15-0.25 versus analysts’ consensus estimate of $0.38.

GE rose to $11.73 (+6.73%) in pre-market trading.

American Express (AXP) reported Q4 FY 2020 earnings of $1.76 per share (versus $2.03 per share in Q4 FY 2019), beating analysts’ consensus estimate of $1.30 per share.

The company’s quarterly revenues amounted to $9.351 bln (-17.7% y/y), roughly in-line with analysts’ consensus estimate of $9.319 bln.

AXP fell to $119.00 (-1.77%) in pre-market trading.

• Reiterates that government acknowledges the risks that companies are facing because of lockdowns 
• Says he hopes to provide update on green gilt issuance when he delivers budget statement on March 3

3M (MMM) reported Q4 FY 2020 earnings of $2.38 per share (versus $1.95 per share in Q4 FY 2019), beating analysts’ consensus estimate of $2.17 per share.

The company’s quarterly revenues amounted to $8.583 bln (+5.8% y/y), beating analysts’ consensus estimate of $8.389 bln.

The company also issued in-line guidance for FY 2021, projecting EPS of $9.20-9.70 versus analysts’ consensus estimate of $9.52 and revenues of +5-8% (implying $33.8-34.8 bln) versus analysts’ consensus estimate of $33.95 bln.

MMM rose to $171.84 (+0.85%) in pre-market trading.

Johnson & Johnson (JNJ) reported Q4 FY 2020 earnings of $1.86 per share (versus $1.88 per share in Q4 FY 2019), beating analysts’ consensus estimate of $1.83 per share.

The company’s quarterly revenues amounted to $22.500 bln (+8.7% y/y), beating analysts’ consensus estimate of $21.621 bln.

The company also issued upside guidance for FY 2021, projecting EPS of $9.25-$9.45 versus analysts’ consensus estimate of $9.00 and sales of $88.8-$90.0 bln versus analysts’ consensus estimate of $88.6 bln.

JNJ rose to $169.00 (+1.82%) in pre-market trading.

• Monetary policy does have some limits in trying to achieve inflation target
• We have done our utmost but still did not achieve 2% inflation
• Ultimately, central banks are responsible for preventing excessive inflation/deflation

The Confederation of British Industry (CBI) reported on Tuesday its latest survey of retailers showed retail sales volume balance stood at -50 in the year to January 2021, down sharply from -3 in December 2020. That was the lowest reading since May 2020, pointing to a steep decline in retail sales volumes amid tightened restrictions across the UK.

Economist had forecast the reading to decrease to -28.

In addition, retail sales volumes are expected to drop at a broadly similar pace in the year to February (-47).

The report also revealed that the orders' balance was also the weakest since May 2020 (balance of -45, from -4 in December) with a similar decline seen next month (-44). Meanwhile, stock levels in relation to expected sales increased but remained below its long-run average (balance of +12, from +3), and are forecast to remain broadly similar next month (+11).

"Today’s data brings home the ongoing challenges of lockdown for the retail sector, as sales volumes weaken once again,” noted Ben Jones, CBI Principal Economist. “With the lockdown likely to remain in place in the near-term, retailers expect this weakness to continue. It is therefore vital that government support continues in parallel to restrictions.”

Reuters reports that Italian Prime Minister Giuseppe Conte went to see the head of state on Tuesday to hand in his resignation, hoping to be given the opportunity to try to put together a new coalition and rebuild his parliamentary majority.

Conte lost his absolute majority in the upper house Senate last week when a junior partner, the Italia Viva party headed by former premier Matteo Renzi, quit in a row over the government’s handling of the coronavirus crisis and economic recession.

Efforts to lure centrist and independent senators into the coalition ranks to fill the hole left by Renzi have met little success, leaving Conte no choice but to resign and open a formal government crisis that will give him more time to find a deal.

President Sergio Mattarella is expected to accept his resignation and hold rapid consultations with party leaders to test the political waters.

Bloomberg reports that according to analysts, what appears to be a downward trend in the number of new coronavirus infections in Japan could become another reason to buy Japanese shares.

“Japan’s comparative success in controlling the spread of the virus could provide further impetus for purchases of Japanese equities by global investors,” analysts at Nomura wrote in a report on Monday.

Foreigners bought a net 66.5 billion yen ($641 million) of Japanese stocks in the first two full weeks of this year in the cash and futures market. Japan’s blue-chip stock gauge Nikkei 225 has rallied 4% in 2021 so far, exceeding the 2.6% gain in the S&P 500.

During the first and second waves of infections in spring and summer last year, “once the rate of increase declined from the peak by at least 10ppt, growth in new cases remained under control for some time,” the analysts wrote in the note. “The trend may be following a similar pattern this time around.”

While new infections have fallen, Tokyo recorded 1,026 cases on Tuesday. One criteria for lifting the emergency in the capital is for daily cases to fall to around 500, though Economy Minister and Japan virus czar Yasutoshi Nishimura has said there are other factors involved and simply meeting that criteria wouldn’t mean an end to the emergency.

Reuters reports that Ifo economic institute said that sentiment among German exporters in the industrial sector improved significantly this month, hitting its highest since October.

“Clarity on Brexit and the U.S. presidency, a robust industrial economy and the start of global vaccinations have led to cautious optimism in the German export industry,” Ifo President Clemens Fuest said.

Reuters reports that central bank Governor Yi Gang said that China's monetary policy will continue to support economic growth and the central bank will watch debt and non-performing loan risks.

Yi said China's macro policies will focus on maximising employment, which will help boost consumption, and China's exports will remain pretty good this year.

"Monetary policy will continue to prop up the economy, but at the same time we will watch for the risks. We will keep a delicate balance between supporting economic recovery, at same time preventing risk," Yi said.

"One risk is the macro leverage ratio of China increased somewhat last year, the second risk is non-performing loans that are growing, and we also look at external risks, which is look at the capital flow situation.

eFXdata reports that Bank of America Global Research discusses USD/CAD outlook.

"We see limited downside potential in USD/CAD from current levels. The broader USD has declined back to equilibrium. Global risk assets have already to a large extent priced in global recovery. Most importantly, as 2021 plays out, US vs. CA fundamentals look unlikely to deteriorate particularly on the back of large fiscal expansion in the US, which should keep USD/CAD fair value supported near our current estimate of around 1.29. In fact, our expectation is for US-CA rate differentials to rise, provided that oil prices prove contained despite ongoing recovery," BofA adds.

Reuters reports that China and New Zealand signed a deal on Tuesday upgrading a free trade pact to give exports from the Pacific nation greater access to the world’s second-largest economy.

New Zealand Prime Minister Jacinda Ardern confirmed the signing of the expanded deal.

“China remains one of our most important trade partners...For this to take place during the global economic crisis bought about by COVID-19 makes it particularly important,” she told a news conference.

The pact widens an existing trade deal with China to ensure it remains fit for purpose for another decade, Trade Minister Damien O’Connor said in a statement.

It provides for tariffs to be either removed or cut on many of New Zealand’s mostly commodities-based exports, ranging from dairy to timber and seafood, while compliance costs will also be reduced.

RTTNews reports that data from the statistical office INE showed that Spain's producer prices continued to decline in December albeit at a slower pace.

Producer prices decreased 1.4 percent year-on-year in December, much slower than the 2.8 percent fall posted in November.

The annual fall was driven by a 6.3 percent decline in energy prices. Excluding energy, producer price inflation rose to 0.8 percent from 0.5 percent.

On a monthly basis, producer prices grew 1 percent versus a 0.9 percent increase in November.

FXStreet reports that Ben Udy, Australia & New Zealand Economist at Capital Economics, expect the RBNZ to tighten monetary policy in the years ahead.

“We expect asset purchases to be wound down from this year before the Bank hikes rates in 2022. There are several reasons why we no longer expect further monetary stimulus. First, the recovery in output occurred much faster than we had anticipated as GDP returned to pre-virus levels in Q3. Second, most measures of underlying inflation surged in Q4. All of them are now close the RBNZ’s target mid-point. Third, the housing market in New Zealand is running red hot. By the end of 2022 we expect inflation will have been around or above target for nearly two years and that employment should be above its maximum sustainable level. On that basis we expect the Bank to begin hiking rates at the end of 2022.”

During today's Asian trading, the US dollar rose against the euro and fell slightly against the yen.

Traders are trying to avoid risks against the background of the continued high incidence of COVID-19 in a number of regions of the world. Concerns about the spread of new strains of coronavirus are dampening the optimism created by the advent of vaccines, analysts say.

In addition, doubts are growing that US President Joe Biden will be able to pass through Congress his plan to support the economy of $1.9 trillion, given the clear opposition from Republicans.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), rose 0.2%.

The Federal Reserve System  begins a two-day meeting on Tuesday, but traders do not expect any important steps from it. The base interest rate is likely to remain at 0-0. 25% per annum in the coming years, and the only point where changes are possible in the foreseeable future concerns the timing of the asset purchase program, experts say.

eFXdata reports that CIBC Research discusses the BoE policy trajectory going into its Feb-4th meeting.

"The February MPC meeting will see revised estimates which will reflect the impact of a third national lockdown. Ahead of the February MPC decision, the Bank appears minded to avoid negative rates, with the Governor citing “lots of issues” in this regard. With the Bank reluctant to go negative, expect pressure on the BoE to consider a 10bp micro cut in order to provide some stimulus ahead of a vaccine dependent recovery into H2. Expect the latter to encourage GBP/USD to return to levels not seen since early 2018," CIBC adds.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2232 (994)

$1.2204 (285)

$1.2183 (596)

Price at time of writing this review: $1.2126

Support levels (open interest**, contracts):

$1.2098 (1431)

$1.2069 (1116)

$1.2033 (2812)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date February, 5 is 47506 contracts (according to data from January, 25) with the maximum number of contracts with strike price $1,2000 (2896);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3791 (1703)

$1.3760 (1574)

$1.3715 (1126)

Price at time of writing this review: $1.3640

Support levels (open interest**, contracts):

$1.3552 (792)

$1.3516 (309)

$1.3477 (1703)

Comments:

- Overall open interest on the CALL options with the expiration date February, 5 is 11425 contracts, with the maximum number of contracts with strike price $1,3750 (1703);

- Overall open interest on the PUT options with the expiration date February, 5 is 19748 contracts, with the maximum number of contracts with strike price $1,2500 (2183);

- The ratio of PUT/CALL was 1.73 versus 1.72 from the previous trading day according to data from January, 25

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

According to the report from the Office for National Statistics, since February 2020, the number of payroll employees has fallen by 828,000; however, the larger falls were seen at the start of the coronavirus (COVID-19) pandemic.

Data from our Labour Force Survey (LFS) show a large increase in the unemployment rate while the employment rate continues to fall. The number of redundancies reached a record high in September to November 2020, although the weekly data show it has dropped from the peak in September.

The UK employment rate, in the three months to November 2020, was estimated at 75.2%, 1.1 percentage points lower than a year earlier and 0.4 percentage points lower than the previous quarter.

The UK unemployment rate, in the three months to November 2020, was estimated at 5.0%, 1.2 percentage points higher than a year earlier and 0.6 percentage points higher than the previous quarter.

In the three months to November 2020, the redundancy rate reached a record high of 14.2 per thousand. Economists had expected an increase to 5.1%.

Early estimates for December 2020 indicate that the number of payrolled employees fell by 2.7% compared with December 2019, which is a fall of 793,000 employees; since February 2020, 828,000 fewer people were in payrolled employment.

The Claimant Count increased slightly in December 2020, to 2.6 million; this includes both those working with low income or hours and those who are not working.

There were an estimated 578,000 vacancies in the UK in October to December 2020; this is 224,000 fewer than a year ago and 81,000 more than the previous quarter.

Growth in average total pay (including bonuses) among employees for the three months September to November 2020 increased to 3.6%, and growth in regular pay (excluding bonuses) also increased to 3.6%.