Daily Market Commentary 5th February 2021

The Bank of England left rates unchanged and QE in place, but the commentary was moving markets. The BoE Governor was bullish in the Banks outlook for the economy, despite the current situation and huge negative growth reviews. The Bank promised the economic tide would turn sharply in 2021, with increased and pent up savings driving a consumer led recovery, when the country finally moves out of the deep and dark lockdown. The Bank also reviewed Q1 GDP to negative 4.2%, from projected gains of 2%! The Bank also warned banks to prepare for the possibility of negative interest rates, joining the EU and Japan, but iterated no current plans to do so. The announcement boosted bond yields and the GBP, which rallied to 1.3650 despite a stronger reserve, while the EUR fell to 1.1950.

US markets continued to book huge equity gains, with risk appetite surging, today triggered by stronger than expected jobs numbers, leading into the all important Non Farm Payrol’sl released tonight. US Factory Orders also jumped 1.1%, while the Dollar continued to surge. The trade exposed commodity currencies suffered the stronger Dollar, with the AUD falling below 0.7600, while the NZD dropped to 0.7150. NZ Bond Yields are on the rise, supported by the strong economic data, headlined by the surge in local employment.

Markets will turn their focus to US Non Farm Payrolls, to close out the week, and signs are good. The reversal in employment numbers, in the US, has surprised markets as the jobless claims have been on the rise recently. Equity markets have shrugged off last weeks retail rebellion and institutions are firmly back in charge, for now.