New Week Starts Slowly; Volatility Seems Low

On Monday, the financial markets have been calm so far, with investors waiting for some meaningful macro news to set a direction for this week. Meanwhile, German industrial production crashed in December, printing -4.1% year-on-year, down from -2.2% in November. At the same time, the monthly change declined notably, from 0.3% to -0.3%. Nonetheless, the EURUSD pair traded at its one-month high near 1.1450.

From other news, Klaas Knot, the Dutch central bank president and a member of the ECB’s Governing Council, confirmed the recent hawkish shift in the central bank, saying that he expects the ECB to raise interest rates in the fourth quarter of this year.

On Friday, the US jobs report for January was published, showing the economy created 467,000 new jobs in that month, three times the consensus of 150,000. Additionally, the BLS also revised December payrolls from 199,000 to 510,000. Lastly, as part of the BLS’s annual revisions, November was revised from 249,000 to 647,000. This means that the previous two months’ revisions were 709,000 higher, putting the monthly average to about 500,000, nearly the same as before the pandemic.

Investors now expect five rate hikes this year, starting in March, although there is a rising possibility of a 50 bps rate increase in March.

US stock markets continue to be pressured amid rising yields and inflation fears. The Nasdaq index failed to stay above the 200-day moving average, while the SP500 index has remained above it so far. 

More volatility could come throughout the week as US inflation data and other macro data are due.

Source: https://www.axiory.com/analytics/market-news/new-week-starts-slowly-volatility-seems-low