Citi Wealth Insights

EUR: ECB makes no changes to policy at its board meeting overnight but makes 2 mentions of the strength of the EUR and its dampening impact on longer term inflation expectations.

USD: Risk – on sentiment fuels a sharp rally in risk assets overnight but leaves the broad based USD Index flat around 90.50 – Biden’s inauguration as US President fuels optimism in his USD1.9tn stimulus plan. However, Citi analysts warn of risks in getting Congressional approval, given significant Republican opposition and expect a much less $500bln-$1trln in new COVID-19 relief while also emphasizing the considerable uncertainty around any bipartisan agreement.

USD: Confirmation of ex-Fed Chair Janet Yellen as the new US Treasury Secretary – key mentions –

CNY: Tighter domestic liquidity conditions but a weaker CNH - USDCNH breaks above 6.50 yesterday (if only briefly) as USDCNY daily fixing hits 6.4845, +212 pips from the last fixing and +93 pips from the last closing at 6.4752.

Market forces, rather than government mandates alone, are now powering the switch from fossil fuels to renewables and Citi analysts believe the investment case for renewables just became even more compelling.

With large-scale production and additional vaccines likely, an end to the global pandemic is expected to begin by mid-year 2021, bringing a potential sharp broadening out of the world economic recovery in the second half of 2021. Citi’s Global Investment Committee thus increased its Overweight in Equities, and increased its Underweight in Bonds. Gold and Real Estate Investment Trusts (REITs) remain Overweight while Cash remains Underweight.