ECB reaction, J&J vaccine gets EU greenlight, jobless claims slightly improve, bitcoin and NFTs

US stocks are rising again after a subtle improvement in weekly jobless claims will likely support the Fed’s ultra-dovish stance and give some firepower for the Biden administration to deliver infrastructure spending.  The best outcome for stocks is marginal improvements with economic data that completely push back Wall Street’s expectations on when the taper tantrum will occur.  Hopes for infrastructure spending are low, but that could change if portions of the economy continue to struggle.

EUR

The ECB decision and EMA recommendation of the J&J COVID vaccine provided a boost to the euro.  The ECB statement was somewhat dovish given the ramping up of PEPP purchases and calls to avoid a preventing a tightening of financing conditions.  No major changes to the size and timing of the total program were announced and that signals they are confident the economy will be back to normal by next March.

Prior to ECB Chief Lagarde’s press conference, officials noted that she will acknowledge that the risk to the economic outlook has become more balanced.  European banks took a hit following the announcement to have PEPP purchases at a significantly higher pace.  Germany’s 10-year government bond yield fell 2.5 basis points to -0.341%.

Lagarde’s press conference was mostly upbeat.  She refrained from committing herself to quantities and timeliness of their bond purchases and did a good job in alleviating short-term fears.  Lagarde added they will not be doing yield-curve control which showed some confidence with where they stand right now.  The euro gave back its earlier gains mostly on the advance with Treasury yields.

Vaccines

The eurozone outlook is nowhere near as good as the US due to stark differences with their respective COVID vaccine rollouts.  The EU has bet heavily on the AstraZeneca COVID vaccine and confidence is waning after Denmark suspends it after blood clot concerns.  Norway’s NIPH will pause AstraZeneca’s COVID vaccinations.  Italy’s medicines authority Aifa will ban a portion of the AstraZeneca vaccine after notifications of some serious adverse effects.  The concern in the euro area is that these negative AstraZeneca headlines could lead to some hesitancy in signing up to get vaccinated.  The UK government has reiterated their confidence that the AstraZeneca vaccine is safe and effective.

Some countries are taking precautionary measures over the AstraZeneca COVID vaccine and that is why it is important for the EU to secure other vaccines quickly.  The economic outlook for Europe will take a hit until COVID vaccines are readily available and that will likely push back expectations on when Europe can get to herd immunity.

The European Medicines Agency (EMA) approved the J&J COVID-19 vaccine which should help improve the EU’s disappointing vaccination campaign.  The EU has committed to purchase 200 million doses, with an option for an additional 200 million more.  The J&J vaccinations are expected to arrive in April if everything goes smoothly.

The European recovery will lag the US by a few months and that could keep the euro-dollar stuck in a trading range around the 1.20 level until the summer.

Jobless Claims

The downward trend with jobless claims remains and expectations are growing that the labor market is about takeoff.  Weekly initial jobless claims improved to 712,000, better than the 725,000 forecast and upwardly revised 754,000 prior reading. The deep freeze impact that hit many jobs in the South is behind us and the future is looking bright due to the coronavirus vaccine rollout success.

Leisure and Hospitality jobs still have a void of 3.45 million jobs, but half of those jobs could come as quickly as this summer if the reopening of the US continues.  Jobless claims remain elevated, still above the pre-pandemic record of 695,000 for 51 consecutive weeks.  The downward trend should accelerate, and claims should fall below 600,000 by April.

Bitcoin

Bitcoin appears to be coiling for another breakout.  The latest drivers for bitcoin are coming from growing interest with NFTs.  Today, a Christie’s auction fetched a record USD69.3 million for the artist Beeple’s monumental collage in a purely digital artwork (NFT).

Social media art is completing embracing Non-fungible tokens (NFTs), which are cryptographic assets on blockchain.  NFTs are helping Bitcoin’s mainstream acceptance and that could be the catalyst to push prices into record high territory.  A steady flow of celebrities from Lindsay Lohan, musician Grimes, Elon Musk, Jack Dorsey, Mark Cuban, and William Shatner, are endorsing NFTs.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya