The new commander in chief pushes US equities higher – Market Overview

By: Miguel A. Rodriguez

16:46, 21 January 2021

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Exuberance and risk-off sentiment push equities to the skies

The USA

The act of transfer of power to the White House proceeded without incidents, and Biden's speech focused more on the idea of ​​union and away from hostilities produced the desired effect of calm and confidence for the markets.

The main focus will continue to be the pace of vaccine administration, for which Biden has set an ambitious goal and the approval of the $1.9 trillion fiscal stimulus package.

The market has already begun to anticipate a good development in this regard, and the North American indices have reacted positively, reaching new all-time highs.

The S&P500 Index broke past resistance levels and reached a high at 3852 points, where it sits currently.

The uptrend has resumed, and from now on, everything will depend on the promptness in which the fiscal stimulus package is approved and that no block or impediment delays it.

In short, back to the fundamental factors in the market.

EUROPE

In Europe, investors' attention is focused on today's meeting of the European Central Bank.

No change in its monetary policy is expected after last month. The Governing Council of the European Central Bank increased its asset purchase program by 500 billion, up to 1850 billion Euros, and extended it temporarily.

President Lagarde will make some mention of the last process of recovery of the activity. However, it will very likely show concern about the infection's resurgence and the new and strict measures to restrict mobility in most European countries that will harm the economy.

For this, she will continue to show her determination to do whatever it takes to counteract these consequences. Monetary policy will remain expansionary for an extended period, but the Euro's strength is a factor of concern due to its effect contrary to economic stimulus policies and inflation targets.

In this sense, a comment could come that would influence the Euro if President Lagarde expressed it more directly. In reality, the exchange rate is not an objective of the ECB.

Therefore, they do not have the tools to intervene in the market. The most that could happen is that his statement regarding the harmful effects of the dollar's strength was more intense and that what is known in the market as verbal intervention occurs.

While waiting for events, the Euro shows different behavior, losing territory against the British pound, a currency that today rises against all its counterparts.

EUR/GBP has broken down a critical support level located at 0.8865. It makes its way towards the price concentration zone around 0.8730, from a technical analysis point of view with a daily close below this level.

Sources: WSJ, Bloomberg.

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