Can Joe Biden Make America Illustrious Again?

The dollar strengthened on the back of a dismal market mood. Poor US employment and retail sales data spurred the sour sentiment, which extended into the weekly close. The greenback posted substantial gains against most of its major rivals.

Concerns were triggered by a delay in the Pfizer’s vaccine distribution in Europe, which revived concerns about economic progress within the pandemic context. Wall Street closed in the red, US Treasury yields edged lower.

On Saturday, Prime Minister Boris Johnson announced additional restrictive travel measures on Friday, to protect “against the risk of as yet unidentified new strains.” The UK will close all travel corridors starting this Monday, and anyone flying into the country will need to provide a negative coronavirus test.

Gold plunged on renewed interest for the dollar, posting its lowest settlement in a month at $1,827.80 a troy ounce. Crude oil was also affected, with WTI closing the week at $52.00 a barrel.

Here are the key market moving factors for the week:

 The US

• The dollar clung to gains on Monday and the Japanese yen edged higher as softening U.S. economic data and rising global coronavirus cases kept investors cautious, while lockdowns and Italian political turmoil held the euro under pressure.
• The rising US Dollar and uncertainties surrounding US President-elect Biden’s 1.9 trillion stimulus plan appear to be the primary weighing factors.
• Market sentiment is tilted towards the cautious side after US equities pulled back from their recent highs despite robust corporate earnings.
• As US markets are closed for a public holiday, thinner liquidity conditions could exacerbate price volatility.
• US Treasury yields have receded from their recent highs, alleviating pressure on precious metals. A sudden jump in longer-dated rates in the past two weeks have caused precious metal prices to plunge sharply (chart below).
• Rising yields translate into higher “risk-free” rates of return, which make it more expensive to hold the non-interest-bearing yellow metal and thus entice liquidation.

EUROPE

• The euro dipped to a six-week low of $1.2066 in Asia and fell to a one-month low of 125.20 yen.
• Europe is also facing surging cases and an Italian government that must survive crucial votes in parliament on Monday and Tuesday in order to cling to power.

The UK

• Meanwhile, in the UK, where the variant first originated, the next phase of its COVID-19 vaccination programme will be released on Monday.
• Covid-19 deaths have been at the highest they’ve ever been — and the more infectious variants could make things much worse.
• However, the UK reported 38,598 new coronavirus cases on Sunday, which is the lowest since December 27.
• The nation will start offering doses to people aged 70 and above and those who are considered clinically extremely vulnerable to the coronavirus.
• “Today is a significant milestone in our vaccination programme as we open it up to millions more people who are most at risk from COVID-19,” British Prime Minister Boris Johnson said on Sunday.

JAPAN

• Japan Capacity Utilization fell from previous 6% to -2.9% in November
• Japan Industrial Production (YoY) below forecasts (-3.4%) in November: Actual (-3.9%)

AUSTRALIA

• The trade-sensitive Australian Dollar slid lower after disappointing retail sales data out of China overshadowed strong industrial production numbers.
• A fresh outbreak of Covid-19 on the mainland could be behind the recent drop-off in Chinese iron ore demand.
• Australia’s robust economic recovery may continue to underpin AUD against its major counterparts.
• Attention now turns to Australian employment data and a flurry of PMI releases on Thursday, with the local unemployment rate expected to decline from 6.8% to 6.7%.

CHINA

• China’s economy gained further momentum towards the end of 2020 as the domestic activity continued to recover from the Covid-19 driven downturn.
• Gross domestic product climbed 6.5 percent on year in the fourth quarter of 2020, the National Bureau of Statistics said on Monday. The rate exceeded the expected 6.1 percent and up from 4.9 percent growth posted in the third quarter.
• On a seasonally adjusted basis, GDP expanded 2.6 percent but slower than the revised 3 percent rise in the preceding three months and the 3.2 percent increase economists had forecast..

Market Overview:

Gold

• Gold prices plunged to a six-week low of US$ 1,805 before bouncing back quickly on Monday.

Oil

• Oil prices fell on Monday, extending losses that last week ended a rally driven by production cuts and strong Chinese demand, with the market’s recovery outlook being called into question as coronavirus infections rise.
• Brent crude fell 45 cents, or nearly 1%, to $54.65 a barrel by 0207 GMT, after dropping 2.3% on Friday. U.S. oil was down by 43 cents, also nearly 1%, at $51.93 a barrel, having declined 2.3% in the previous trading session.

Below are the major market moving events for the week:

 All times listed are EST

Monday

US Markets Closed for the Martin Luther King Jr. Holiday

8:30 – BoE Gov Baily Speaks

Tuesday

5:00: Germany – ZEW Economic Sentiment: anticipated to rise to 60.0 from 55.0.

20:30: China – PboC Loan Prime Rate: previously set at 3.85%.

 Wednesday

2:00: UK – CPI: probably advanced to 0.5% from 0.3% YoY.

5:00: Eurozone – CPI: viewed to have remained flat at -0.3%.

8:30: Canada – Core CPI: anticipated to have dropped to -0.2% MoM from 0.2%.

10:00: Canada – BoC Monetary Policy Report, followed by Interest Rate Decision.

10:30: US – Crude Oil Inventories: seen to have replenished to -2.266M from -3.247M.

Tentative: US President Biden Speaks: after swearing-in, the new US President will address the nation.

19:30: Australia – Employment Change: expected to plummet to 50.0K from 90.0K.

Thurday

7:45: Eurozone – ECB Interest Rate Decision

8:30: US – Building Permits: seen to drop slightly to 1.604M from 1.635M.

8:30: US – Initial Jobless Claims: predicted to shrink to 795K from 965K.

8:30: Eurozone – ECB Press Conference

19:30: Australia – Retail Sales: printed previously at 7.1%.

 Friday

2:00: UK – Retail Sales: seen to have surged to 0.9% from -3.8%.

3:30: Germany – Manufacturing PMI: expected to have slipped to 57.5 from 58.3.

4:30: UK – Manufacturing PMI: likely remained steady at 57.3.

4:30: UK – Services PMI: expected to remain flat at 49.9.

8:30: Canada – Core Retail Sales: will probably have slumped to 0.3% from 1.0%.

10:00: US – Existing Home Sales: expected to retreat to 6.54M from 6.69M.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

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