Update -

Treasury Market Commentary

A weekly economic update from our Treasury team.

Published

8th January 2021

Category

Macro Commentary

Market focus at the start of the year is on the US, with Biden gaining control of the Senate. This is expected to lead to higher spending, which should push up demand and inflation, but will also increase borrowing and the already huge government deficit. Meanwhile, the civil unrest in Washington is a real concern ahead of the presidential inauguration on January 20th.

Virus infection levels continue to reach new highs, with the latest lockdown measures further weighing on the economic damage this pandemic is causing. The vaccine rollout provides some optimism but there remains a long way to go.

The damage to the economy may force the Bank of England to ease monetary policy further in the coming months, but we still do not expect negative interest rates.

The Brexit agreement has been generally well received, but it is fairly limited in scope, with the vitally important services sector not being covered.

On the exchanges, the dollar continues to trade near its lowest levels since mid-2018, with sterling and Euro both pushing higher.

GBP/USD has good buying interest now at 1.3500 but has so far stalled at the significant 1.3700 level.

GBP/EUR continues to find buying interest at 1.1000 but remains within the well-established range of 1.0800 – 1.1300.

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

13/1/21

US CPI YoY

1.2%

1.3%

15/1/21

UK Industrial Prod. YoY

-5.5%

n/a

15/1/21

UK Manufacturing Prod. YoY

-7.1%

 n/a

15/1/21

UK Construction Output YoY

-7.5%

 n/a

15/1/21

UK Trade Balance

-£1738m

 n/a

15/1/21

UK Monthly GDP (3M/3M)

10.2%

 n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

EUR/USD

1.2225

AUD/USD

0.7755

GBP/USD

1.3565

USD/AED

3.6730

GBP/EUR

1.1095

GBP/AED

4.9800

USD/CHF

0.8880

EUR/AED

4.4900

USD/JPY

104.05

XAU/USD

1891

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

6856

+6.14%

S&P

3803

+1.27%

EUROSTOXX

3622

+1.96%

DFM GENERAL INDEX

2625

+5.07%

UK Benchmark Rates

Libor

 

Swap Mid (SONIA) ss((SONIA)

 

3 month

0.02675%

2 year

-0.05%

6 month

0.03475%

3 year

-0.04%

12 month

0.07900%

5 year

+0.02%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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Weekly

Treasury Market Commentary

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