US Dollar Steady, Euro Slips, GBP Benefits From Vaccine Success

EUR/USD Analysis & News

QUICK TAKE: US Dollar Steady, Euro Slips, GBP Benefits From Vaccine Success

Equities: The morning bounce which had stemmed from Asia has slowly faded as we approach the Wall Street open. Soft German IFO figures did little to support EU bourses, while reports that French President Macron may announce a 3rd national lockdown on Wednesday has weighed on the CAC 40. Elsewhere, UK PM Johnson will approve a new border crackdown from tomorrow, which could ban entry into the UK from COVID hotspots (South Africa and Brazil), in turn, airliners are among the underperformers to begin the week. The tech sector is outperforming as market participants brace for a slew of large tech earnings, in particular, Apple, Microsoft and Facebook.

Euro Stoxx 50 Sector Breakdown

Outperformers: IT (1.1%), Healthcare (0.3%), Consumer Staples (-0.3%)Laggards: Energy (-1.9%), Financials (-1.8%), Industrials (-1.7%)

US Futures: S&P 500 (0.1%), DJIA (-0.5%), Nasdaq 100 (1.0%)

Intra-day FX Performance

Source: Refinitiv

USD holds steady ahead of FOMC risk event in what has been a relatively subdued start for major FX pairs. Slight underperformance in the Eurowith the aforementioned IFO data not helping matters. Elsewhere, GBP/USDcontinues to hover around the 1.37 handle, while EUR/GBP edges back towards key support at 0.8860. The successful rollout of the vaccine program across the UK with 10% of the population reportedly receiving their first dose of the vaccine has kept GBP underpinned, particularly against the Euro, given that the EU has faced significant supply disruptions for a vaccine rollout. In turn, EUR/GBP rallies are likely to be faded. Modest gains for NZD which has benefitted from cross AUD/NZD selling. As I have mentioned last week, AUD/NZD is trading at rich levels relative to spreads.

Chart in Focus: AUD/NZD vs AU/NZ 10y bond spreads

Source: Refinitiv

Commodities: Iraq has pledged to cut output in January and February after pumping more than its OPEC+ quota last year, boosting confidence in the OPEC+ deal. However, opening gains in the oil complex have tracked risk sentiment lower. While Gold prices have seen a slight bounce as bond yields slip.

Looking ahead: There is little on the docket and thus focus will be on the upcoming corporate earnings as well as the FOMC meeting later this week.

DailyFX Economic Calendar