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·         Dollar set for best week in three months as pandemic recoveries diverge

The dollar headed for its best weekly gain in three months, lifted by growing confidence that the U.S. economic recovery will outpace global peers.

The dollar index was just shy of the two-month high reached overnight amid signs of resilience in the labor market, with closely watched nonfarm payroll figures due Friday.

The current bout of dollar strength could continue for “several weeks,” he said, but the picture is murkier thereafter as Europe and Asia catch up with immunizations and the Federal Reserve’s continued ultra-easy monetary policy caps a rise in long-term U.S. yields.

The dollar index was little changed at 91.529 early in the Asian session after climbing every day so far this week, and touching 91.581 on Thursday for the first time since Dec. 1.

The gauge is on track for a 1.1% weekly advance, the most since Nov. 1, building on a 0.3% rise the previous week.

Analysts and investors are weighing whether dollar strength this year is a temporary position adjustment after a 7% drop for the dollar index in 2020, or a longer-lasting shift away from dollar pessimism.

There are potentially a lot of dollar shorts to cover, particularly against the yen, where hedge funds had racked up their biggest bearish bets since 2016.

The dollar was little changed at 105.585 yen on Friday after earlier pushing as high as 105.70 for the first time since Oct. 20.

The euro was mostly flat at $1.1966, maintaining its first move below $1.20 since Dec. 1 from overnight.

Westpac strategists see Europe’s vaccine rollout accelerating by the end of this quarter, which, coupled with the Fed’s commitment to ultra-loose monetary policy, will put pressure back on the dollar.

“DXY upside potential is living on borrowed time,” they wrote in a note, referring to the dollar index. “Sell DXY into 92.”

 

·         Longer-term U.S. Treasury yields rose in anticipation of a large pandemic relief bill from Washington as well as on heightening inflation expectations.

The benchmark 10-year yield stood at 1.137%, having risen to a three-week high of 1.162% the previous day while the 30-year bonds yielded 1.931%, near its 10 1/2-month high of 1.951% touched on Thursday.

Bond yields rose in Europe as well, with Germany's 30-year government bond yield climbing back into positive territory for the first time since September.

A market gauge of future U.S. inflation was at its highest since October 2018 while that for the euro zone hit its highest since May 2019.

 

·         U.S. thanks Taiwan for help resolving auto chip shortage in key trade meeting

 

·         Bank of England might not need to cut rates further: Nomura

George Buckley from Nomura runs through the latest Bank of England decision, and their stance on negative interest rates.

 

·         UK's Covid-19 hotel quarantine policy to start on February 15

Britain confirmed on Thursday that it will introduce its new mandatory hotel quarantine rules for travellers returning from dozens of countries deemed at high risk from Covid-19 variants this month.

The policy, which will start on February 15, will require all UK citizens and permanent residents returning from countries on its travel ban list to enter quarantine in a government-approved centre for 10 days.

 

·         Italy's Draghi will meet trade unions after parties - source

Italy’s Prime Minister Designate Mario Draghi will hold talks with trade unions before wrapping up his consultations and deciding whether he has enough backing to form a new government, a source close to the matter said on Friday.

Draghi, a former European Central Bank chief, will end his round of consultations with the political parties on Saturday.

It is still unclear when he will meet with the trade unions.

 

·         Italy's outgoing PM Conte signals support for PM-designate Draghi

Outgoing Italian Prime Minister Giuseppe Conte on Thursday signaled his support for a government led by the prime minister-designate Mario Draghi.

 

·         Turkey's vaccination process running at full speed with Chinese vaccines

The mass vaccination campaign against COVID-19 continues uninterrupted across Turkey with the inactivated vaccines produced by the Chinese pharmaceutical company Sinovac Biotech Ltd.

Turkey has so far received 13.5 million vaccine doses from China in three separate shipments as part of a procurement deal of 50 million doses. Over 2.2 million citizens have received their first shots since Jan. 14, when the mass rollout began.

 

·         Myanmar resumes vaccination program against COVID-19

Myanmar resumed the vaccination program against COVID-19 across the country on Friday, according to an announcement from the Health and Sports Ministry.

The country started vaccinating about 103,142 frontline medical staff and volunteers since Jan. 27, as the first phase of the nationwide vaccination program, the announcement said.

 

The group of people who will be given priority to be inoculated starting Friday includes union ministers, deputy ministers and union-level officials, senior government employees, elderly over the age of 65 who are residing in townships under the stay-at-home order, former union ministers, deputy ministers and regional or state government members.

 

·         Oil climbs to highest in a year on U.S. growth optimism, crude supply restraint

Oil prices climbed on Friday to their highest levels in a year, extending a run of strong gains on signs of economic growth in the United States and a continued commitment by producers to hold back crude supply.

Brent crude futures climbed 28 cents, or 0.5%, to $59.12 a barrel by 0730 GMT, after hitting a high of $59.41, its highest since Feb. 20 last year. Brent is on track to rise 6% this week.

U.S. West Texas Intermediate (WTI) crude futures were up 29 cents, or 0.5%, to $56.52 a barrel, after touching a high of $56.84, its top since Jan. 22 last year. The benchmark contract is on track for a weekly gain of 8%.

 

CRUDE OIL TECHNICAL ANALYSIS

 

Crude oil prices have pushed north of the 23.6% Fibonacci expansion at 56.26, seemingly setting the stage for a run at the 38.2% level at 59.19. Stagnant RSI warns that momentum may be fragile however. Slipping back below 56.26 – now recast as support – sees the next downside hurdle at 53.90, a former resistance level.

 

Reference:  CNBC, Reuters