US Open Note – Dollar back to gains despite calm day; euro steady

Melina Deltas, XM Investment Research Desk

Dollar records some gains; US stocks at record highs

In a quiet day, the major theme is the inflation expectations in the US that continue to rise. Treasury Secretary Yellen is asking for a larger stimulus package to bring the economy back to full employment. The dollar seems ready to resume its recovery. The US dollar index is moving marginally up, while dollar/yen is approaching the 105.70 level again, hitting the 200-day simple moving average (SMA). In the stock market, an index tracking global bourses met another all-time high and European futures are higher as well. The vaccine rollout continues and should allow the US economy to outperform in the coming months, alongside the massive relief package being brewed in Congress.

Euro stabilizes slightly above 1.20

In the UK, a prediction that annual vaccination may be the solution to the pandemic was the news/headline of the day. France aims to vaccinate up to four million people until the end of February, while Germany may have to extend its lockdown restrictions when state and federal leaders meet on Wednesday. In Italy, Mario Draghi is being prepped up as Italian Prime Minister and he will start a second round of discussions with parties today. If the talks go well, Draghi will announce his cabinet this week. The euro is holding above $1.20 versus the dollar, while the pound is retreating beneath $1.37. Euro/pound is rebounding from the nine-month low around 0.8737.

Later in the day, ECB chief Christine Lagarde will deliver a speech at 16:00 GMT.

Oil is still in upside rally

In commodities, WTI crude oil continues to head higher after flirting with a one-year high in the previous week. The market was surprised with the Saudi Arabia’s voluntary output cut and increase in export prices. A stabilization in the global virus picture may also be fueling optimism around the demand side. However, Russia is likely to expand its production amidst the price rally, even though the uncertainty of the Covid-19 pandemic may limit the scope for substantial increases.