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·         Dollar near two-month highs on relative strength of U.S. recovery

 

The dollar traded near a two-month high versus the euro on Wednesday as investors looked to a widening disparity between the strength of the U.S. and Europe’s pandemic recoveries.

 

The view was bolstered by moves in Washington toward fast-tracking more stimulus spending that contrasted with concerns about extended European lockdowns and expectations for a decline in euro zone growth this quarter.

 

The dollar was little changed at $1.2043 per euro in the Asian session, after strengthening to $1.20115 overnight for the first time since Dec. 1.

 

The broader dollar index was mostly flat at 91.046 after rising to a two-month high of 91.283 in the previous session.

 

The U.S. currency was little changed at 104.985 yen after gaining to 105.17 overnight for the first time since Nov. 12.

 

The New Zealand dollar was a standout Wednesday after data showed the county’s jobless rate unexpectedly dropped, which was seen as ruling out prospects for further central bank rate cuts.

 

The kiwi advanced 0.4% to 72.21 U.S. cents.

 

The Australian dollar added 0.1% to 76.182 U.S. cents, looking to snap a three-day decline.

 

The Aussie managed to gain despite more dovishness from central bankers on Wednesday, with Reserve Bank of Australia Governor Philip Lowe pledging to keep interest rates near zero until there are enough jobs in the economy to push wages growth and inflation higher, a goal that is likely to take another three years.

 

The RBA held its cash rate at a record low 0.1% on Tuesday, and surprised the market by extending its bond buying programme by another A$100 billion.

 

·         Private Sector PMIs and US ADP Nonfarm Figures Put the EUR and the Dollar in the Spotlight

 

For the Aussie Dollar

 

Building approvals jumped by 10.9% in December, following a 2.6% increase in November.

 

According to the ABS,

 

A 6th consecutive monthly increase in approvals took private sector house approvals to a record high in December.

Private sector house approvals surged by 15.8%, while dwellings excluding houses increased by 2.3%.

 

The Aussie Dollar moved from $0.76079 to $0.76113 upon release of the data that preceded service PMI numbers from China. At the time of writing, the Au1ssie Dollar was up by 0.12% to $0.7616.

 

For the Japanese Yen

 

Japan’s Services PMI fell from 47.7 to 46.1 in January, which was a upward revision from a prelim 45.7.

 

According to the finalized Survey,

 

-Rising COVID-19 cases continued to weigh on service sector activity at the start of the year.

-Both output and new business inflows saw sharper declines in January.

-New business inflows fell at the fastest pace in 8-months.

-Employment levels remained stable for a fourth consecutive month, however.

-Firms also remained optimistic towards growth prospects.

-The Japanese Yen moved from ¥105.021 to ¥105.032 upon release of the finalized PMI. At the time of writing, the Japanese Yen was up by 0.04% to ¥104.94 against the U.S Dollar.

At 1.15pm (UK time), the US ADP private employment report will be posted and the consensus estimate is for 49,000 jobs to have been added in January. December’s reading was -123,000, the first negative report in seven months. On Monday, the employment component of the US ISM manufacturing update ticked up from 51.7 to 52.6 in January, even though the headline reading cooled to 58.7, from 60.5. It would suggest that manufacturing firms are feeling more confident in hiring, even if the overall mood has mellowed a little.

·         More Than 104 Million Shots Given: Covid-19 Tracker

 

The biggest vaccination campaign in history is underway. More than 104 million doses have been administered across 66 countries, according to data collected by Bloomberg. The latest rate was roughly 4.22 million doses a day.

In the U.S., more Americans have now received at least one dose than have tested positive for the virus since the pandemic began. So far, 33.7 million doses have been given, according to a state-by-state tally. In the last week, an average of 1.32 million doses per day were administered.

 

Vaccines Across America

Across the U.S., 10.3 doses have been administered for every 100 people, and 64% of the shots delivered to states have been administered

 

·         New Zealand Approves Pfizer/BioNTech Vaccine, Expects 1st Batch By April

 

New Zealand authorized emergency use of the Pfizer/BioNTech coronavirus vaccine on Wednesday, with a view to receiving the first shipment by April.

 

It is the first COVID-19 vaccine to be approved in the country.

 

·         France says no AstraZeneca virus vaccine for people over 65

 

France will only administer the AstraZeneca coronavirus vaccine to people under age 65, President Emmanuel Macron said Tuesday after the government’s health advisory body cited a lack of sufficient data about its effectiveness in older people.

 

The decision could shake up the French vaccination strategy, because the country has prioritized nursing home residents and people over 75. France had counted on the AstraZeneca vaccine for a large part of its upcoming inoculations, until the company announced delays affecting countries around Europe and the world.

 

·         Singapore becomes first in Asia to approve Moderna's COVID-19 vaccine

 

Singapore has become the first country in Asia to grant approval for Moderna’s COVID-19 vaccine and the city-state said it expects the first shipment to arrive around March.

 

The Moderna COVID-19 vaccine is the second to be authorised for pandemic use in Singapore, after the Pfizer-BioNTech vaccine, which is already being rolled out in the city-state.

 

As of Feb. 2, more than 175,000 individuals have received their first dose of the COVID-19 vaccine, Singapore’s health ministry said on Wednesday.

 

·         Biden moves to reverse Trump immigration policies, too slowly for some

 

U.S. President Joe Biden on Tuesday ordered a review of asylum processing at the U.S.-Mexico border and the immigration system as he seeks to undo some of former President Donald Trump’s hardline policies.

 

·         Yellen, IMF chief discuss need for multilateral solutions on debt, other issues

 

U.S. Treasury Secretary Janet Yellen and the head of the International Monetary Fund agreed on Tuesday on the need for multilateral solutions to address debt vulnerabilities and other issues facing the global economy, the Treasury Department said.

 

Yellen’s call with IMF Managing Director Kristalina Georgieva was the latest in a series of initial calls with top global finance officials after taking office last week.

 

·         U.S. could push Myanmar closer to China if Biden slaps sanctions on Southeast Asian country

 

U.S. sanctions on Myanmar following this week’s military coup could open the door for China to extend its influence in the Southeast Asian country, said an analyst from geopolitical consultancy Stratfor.

 

President Joe Biden has threatened sanctions and condemned the military takeover that occurred on Monday.

 

Citing election fraud, Myanmar’s military detained several elected officials including de facto leader Aung San Suu Kyi and declared a one-year state of emergency.

 

·         UK asks EU for Brexit grace period extension to 2023, BBC reports

 

Britain has asked for an extension until 2023 of a grace period on checks that would be conducted on trade moving between Northern Ireland and the rest of the United Kingdom to soften the Brexit impact on the province, the BBC reported.

 

Political editor Laura Kuenssberg said Cabinet Office Secretary Michael Gove had written to the European Commission’s vice president, Maros Sefcovic, to ask for urgent political solutions.

 

As part of the Brexit divorce deal, the two sides agreed a three-month grace period on checks on food goods being moved by supermarkets and some wholesale groups from Britain to Northern Ireland, to ease the impact of the post-Brexit new rules.

 

·         China rejects suggestion that it supported coup in Myanmar

 

China’s foreign ministry on Wednesday rejected the suggestion that it supported or gave tacit consent to Monday’s military coup in neighbouring Myanmar.

 

“Relevant theories are not true. As Myanmar’s friendly neighbouring country, we wish that all sides in Myanmar can appropriately resolve their differences, and uphold political and social stability,” foreign ministry spokesman Wang Wenbin said in response to a question at a daily briefing.

 

The Chinese government’s top diplomat met last month during a scheduled visit to the Myanmar capital with officials including the country’s military chief, Senior General Min Aung Hlaing, who this week seized power in the coup.

 

·         Jack Ma’s uneasy relationship with Beijing casts shadow over Alibaba’s strong earnings and future

 

·         Japan's service sector slump deepens as COVID-19 emergency hits businesses

 

 Japan’s services sector shrank at the fastest pace in five months in January, as a heavy blow to demand from a resurgence in coronavirus infections and a state of emergency in parts of the country greatly hurt new business orders.

 

The final au Jibun Bank Japan Services Purchasing Managers’ Index (PMI) dropped to a seasonally adjusted 46.1 from the prior month’s 47.7, marking the lowest reading since August.

 

The headline index, which compared to a preliminary 45.7 reading, remained firmly in contraction territory - below the 50 neutral level - as new and outstanding business shrank at a faster pace.

 

·         Architect of BOJ's 'bazooka' stimulus calls for fiscal firepower to beat deflation

With interest rates already ultra-low, Japan must switch to bolder fiscal spending to pull itself out of economic stagnation, said Kikuo Iwata, the central bank’s former deputy governor and architect of its “bazooka” monetary stimulus.

 

·         Nomura Holdings Inc, Japan's biggest brokerage and investment bank, reported on Wednesday a 72% increase in quarterly net profit, bolstered by a surge in sales at its newly restructured markets and investment banking business unit.

 

·         Tencent fires 100 employees, blacklists 37 firms in anti-graft campaign

 

 

 

·         Singapore Passes Law to Use Covid Tracing in Criminal Probes

 

Singapore passed legislation that will allow the government to use Covid-19 tracing data in certain criminal investigations, formalizing legal powers that had sparked unusual controversy.

 

The government introduced its TraceTogether technology last year during the early months of the pandemic, promising the data collected would be used only for coronavirus containment. Then in January, Singapore disclosed the app’s data had been tapped for a murder investigation and said it planned legislation to support such efforts.

 

·         Australia's NSW state to ease restrictions after 17 days COVID-19 free

 

Australia’s most populous state of New South Wales said on Wednesday it will ease pandemic restrictions on restaurants and cafes this week after recording 17 days with no local COVID-19 cases.

 

 

·         Australia tells thousands to leave homes as bushfire threatens Perth

 

·         Oil rises on falling U.S. crude stocks, demand hope on stimulus

 

Oil prices rose in Asia on Wednesday after hitting their highest in about a year in the previous session, supported by an unexpected draw in U.S. crude stockpiles and an OPEC+ estimate of a global oil market deficit this year.

 

Market sentiment was bolstered by news that Democrats in the U.S. Congress took the first steps toward advancing President Joe Biden’s proposed $1.9 trillion coronavirus aid plan without Republican support.

 

U.S. West Texas Intermediate (WTI) crude futures climbed 24 cents, or 0.4%, to $55.00 a barrel at 0447 GMT, for a third straight day of gains. The benchmark hit a one-year high of $55.26 on Tuesday.

 

Brent crude futures rose 26 cents, or 0.5%, to $57.72 a barrel, for a fourth day of gains after hitting $58.05 on Tuesday, the highest since January last year.

·         Crude Oil Forecast: Stimulus, Treasury Yield and Pandemic in Focus

 

WTI crude oil prices advanced to a 12-month high of US$ 54.93, reflecting an improved energy demand outlook as the rollout of coronavirus vaccines has appeared to be effective in bringing down the global infections. The US has vaccinated 32.22 million people, more than the total number of Covid-19 infections in the country (26.4 million). The 7-day average of daily new cases has fallen to 146,486 on February 1st from a peak of 259,564 seen on January 8th, marking a rapid decline in new infections with the rollout of vaccines. This trend may hint at a faster removal of lockdowns and normalization in business activity, buoying crude oil prices.

 

The American Petroleum Institute (API) reported a 4.26-million-barrel draw in crude inventories for the week ending January 29th, compared to the baseline forecast of a 0.446-milion-barrel increase. Similarly, the EIA will release the DOE crude oil inventory data on Wednesday, in which markets foresee a 2.3-million-barrel drop in stockpiles after a 9.91-million-barrel decline seen in the week before. Falling US crude inventories recently reflect a pickup in demand as economic growth gains momentum. WTI has historically displayed a negative correlation with inventories, with a 12-month correlation coefficient of -0.466 (chart below).

 

Technically, WTI breached above a “Falling Wedge” and thus opened the door for further upside potential with an eye on US$ 55.23 (161.8% Fibonacci extension) and then US$ 58.75 ( 200% Fibonacci extension). The overall trend remains bullish-biased as suggested by the upward-sloped moving average lines. The MACD indicator formed a bullish crossover, reflecting regained upward momentum.

Reference:  CNBC, Reuters, South China Morning Post, DailyFX