Commodities rise on “reflation trade” dollar edges lower, stimulus news eyed

Markets are on the back foot amid concerns of a quick return to growth, reflating or even inflating prices, with bond yields, oil and copper on the rise, but the dollar falling. The UK’s roadmap of returning to normal, the German IFO Business Climate and news related to US fiscal stimulus are eyed.

Reflation trade: Investors are awaiting what President Joe Biden and fellow Democrats pass in Congress – up to $1.9 trillion in covid relief – and what they might do afterward. The administration is considering vast infrastructure spending. Prospects of high debt issuance have caused a sell-off in bonds, but the higher yields have yet to boost the dollar.

Commodities “supercycle:” China’s 2020 growth and prospects of a US rebound have boosted oil prices after a short profit-taking move. It is unclear how Saudi Arabia and Russia will manage output cuts moving forward. Copper has surged past $9,000 amid supply issues on top of expectations for robust global growth.

Bitcoin hit a new high above $58,000, surpassing a valuation of $1 trillion at one point. Ethereum is trading near its record of over $2,000. Tesla’s founder Elon Musk touted Dogecoin once again.

Jerome Powell, Chairman of the Federal Reserve, is scheduled to testify before Congress on Tuesday and on Wednesday, yet his prepared remarks may come out as early as Monday. The central banker’s comments on inflation, employment and other topics will be closely watched.

UK: GBP/USD is holding onto 1.40 it reached late last week and ahead of a highly anticipated speech by Prime Minister Boris Johnson on easing restrictions. According to reports, he is set to lay out a cautious roadmap to reopening and stress the importance of vaccinations.

Europe: The German IFO Business Climate figures for February are set to show an improvement in sentiment, echoing similar figures from ZEW. EUR/USD has been hovering above 1.21.

Vaccines: Another study in Israel has shown that the Pfizer/BioNTech jabs have dramatically reduced infection and not only disease. The country of nine million has already reached 47% of its population with at least one shot. The US FDA is scheduled to discuss Johnson and Johnson’s single-shot vaccine on Friday.

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