Markets Steady as Holidays Keep Liquidity Thin
Markets began the week in subdued conditions, with Lunar New Year celebrations across Asia and public holidays in both the US and Canada resulting in thin liquidity and limited price action. With US markets closed, there was no fresh lead from Wall Street for equity markets. In currency markets, the US dollar firmed modestly, with the Dollar Index gaining 0.22% to 97.09 as trading volumes remained light. Commodity markets were comparatively more active. Oil prices advanced ahead of renewed talks between the US and Iran, with Brent crude rising 1.31% to settle at $68.64, while WTI gained 1.34% to $63.73. In precious metals, gold slipped 0.99% to $4,992.08, easing back into recent ranges amid reduced liquidity and a slightly firmer dollar.
Sterling in Focus for FX Traders This Week
It is a big week ahead for sterling traders, with a raft of data updates due that could swing the Bank of England one way or the other. The MPC kept rates on hold a couple of weeks ago, but the voting within the committee was much closer than the market expected, with five members voting for a hold and four for a cut, and any drop in data could see a cut sooner rather than later. We have the first key update tonight, with employment numbers due out, and they are followed later in the week by CPI and Retail Sales data. If we do see a consistent theme from the data, especially in inflation and jobs numbers, then we could see a sharp change in interest rate expectations and therefore some big moves in the pound.
Markets and Calendar Kick into Action Today
With liquidity returning and key data due today, markets may take clearer directional cues over the next 24 hours, and traders are expecting to see volatility increase again. The Asian session has little on the cards, and the Lunar New Year is likely to keep liquidity lower; however, once London opens, we should get back to normal markets. UK employment data should see some moves in the pound, with the Claimant Count (exp 15.6k), Average Earnings Index (exp +4.6%), and Unemployment Rate (exp 5.2%) numbers all out early in the day. The New York session sees the return of both US and Canadian markets, and the focus will be on the latter early in the day, with key inflation numbers due out of Ottawa, with CPI (exp +0.1% m/m), Median CPI (exp +2.5% y/y), and Trimmed CPI (exp +2.6% y/y) all released. In the US, Empire State Manufacturing data (exp 6.4) is also due at the same time, but for once, expect the Canadian data to dominate traders’ focus.
