Markets take a breather before action continues

Stock and bond markets in the US will be closed on Monday in observance of the Presidents’ Day holiday and the trading action is expected to remain subdued, especially in the second half of the day. The Bundesbank will release its monthly report and the European Commission will publish the preliminary Consumer Confidence Index for February.

Developments over the weekend seem to have caused the geopolitical tensions to escalate but the impact on risk sentiment remains muted in the European morning.

Reports claim that the US and Taiwan may sign a bilateral trade agreement earlier than expected this year following the ‘not very encouraging’ meeting between China’s Director of the Office of the Central Foreign Affairs Commission Wang Yi and US Secretary of State Antony Blinken in Germany. Meanwhile, Japan’s Defense Ministry of Defense said North Korea fired two ballistic missiles and Japan’s Prime Minister Fumio Kishida requested a meeting of the United Nations Security Council.

During the Asian trading hours, New Zealand (NZ) Deputy Prime Minister and Finance Minister Grant Robertson reiterated that the Reserve Bank of New Zealand (RBNZ) has a responsibility to address inflation. The RBNZ will announce its policy decisions on Wednesday and is expected to raise its policy rate by 50 basis points to 4.75%. Meanwhile, NZD/USD trades in a tight range at around 0.6250 early Monday after having registered losses for the third straight week last week.

USD/JPY, which gained nearly 300 pips last week, stays in a consolidation phase near 134.00 in the European morning.

Following the decline witnessed last week, AUD/USD trades modestly higher on the day at around 0.6900. In the early Asian session on Tuesday, S&P Global Manufacturing and Services PMI data will be featured in the Australian economic docket and the Reserve Bank of Australia will release the Meeting Minutes.

EUR/USD staged a rebound late Friday and ended up closing the previous week virtually unchanged. The pair fluctuates in a tight range early Monday and trades within a touching distance of 1.0700.

GBP/USD managed to end the week slightly above the key 1.2000 level. The pair holds steady at around 1.2050 at the beginning of the week. In the absence of high-impact data releases, markets will keep a close eye on Brexit-related headlines.

Gold price lost more than 1% last week pressured by rising US Treasury bond yields. XAU/USD stays quiet early Monday and trades above $1,840.

Bitcoin failed to make a decisive move in either direction over the weekend but registered its highest weekly close since June above $24,000. BTC/USD edges higher early Monday and was last seen trading near $24,500, where it was up 1% on the day. Ethereum closed in negative territory on Saturday and Sunday but managed to regain its traction to start the week. At the time of press, ETH/USD was up 1% on the day, trading withing a touching distance of $1,700.

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