The calm after the rally

Investors will have to wait for the next Fed policy meeting and for progress in Biden’s $1.9 trillion stimulus plans before they adjust their rising inflationary expectations. For now, the FOMC meeting minutes, which were released late on Wednesday, have ensured markets it will take some time before inflation and the unemployment rate push the Fed to remove some stimulus.

Hence, US Treasury yields, which were last trading around 1.30%, may take the back seat after a sharp rally to 1.33%, putting some life back to low-yielding currencies. Gold was also a victim of the yield trap story, slumping towards November’s lows yesterday, but it is currently trying to fix the damage, and it would be interesting to see if it can push its rebound above the $1,790 restrictive area.

Stocks hold red; oil stays resilient

World stock indices were stuck in red territory despite the rise in commodity shares, with European stocks heading for another negative close as discouraging earnings from Airbus and several banks, justified analyst expectations for a 20% decline in earnings in the fourth quarter. US futures, which almost ignored the impressive monthly expansion in US retail sales on Wednesday, were also preparing to start the day with moderate losses. A small upside surprise in the weekly initial jobless claims for the week ending February 13 strengthened the downside correction in US futures.

WTI crude oil refused to drop below the $61.00 barrier, turning slighty positive on the day.

BoE pushes back on negative rates again

The pound jumped back to the top of the currency performance table, pushing GBP/CHF to a fresh one-year high of 1.2510 and GBP/USD to a new 33-month top of 1.3968, although BoE policymaker Michael Sanders downplayed the case for a lower unemployment rate and higher consumer prices. His tone, however, got less dovish after saying that negative rates are not in the central bank’s plans yet.

ECB’s January accounts confirm supportive policy

Meanwhile, in the Eurozone, the accounts of the ECB’s January policy meeting did not bring any fireworks, as expected, reaffirming the current monetary framework and keeping the door open for additional stimulus. EUR/GBP remained exposed to the 0.8600 level following the cross below April’s trough of 0.8670, while EUR/USD bulls continued to push towards the 20-day SMA seen at 1.2093.

Coming up

Coming up in the calendar, Australia will report preliminary Markit PMIs for February at 22:00 GMT, while Japan’s inflation CPI figures for January may next attract attention at 23:30 GMT.

USD/JPY changed direction after falling to an intra-day low of 105.62, while AUD/USD extended its soft upside break to 0.7788.