Gold Down, US Stimulus Hopes Cap Losses

With the chances of political drama weighing on markets now less likely, after the peaceful transfer of power to newly inaugurated US President Joseph R. Biden, Wall Street wavered on Friday, turning in a mixed performance on the final day of last week’s trade. US indices retreated from all-time highs on a bleaker COVID-19 outlook and the possibility the much-anticipated new stimulus is not necessarily a forgone conclusion.

The dollar was slightly down on Monday morning in Asia. However, the U.S. currency was holding ground against riskier currencies over fresh COVID-19 worries and weak European economic data, in turn stretching dollar selling positions as investors turn to safe-haven assets.

Bets against the dollar have become overcrowded, with U.S. data released on Friday showing that net dollar short positions rising to their highest levels since May 2011.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.10% to 90.118 by 11:48 PM ET (4:48 AM GMT).

Here are the key market moving factors for the week:

 The US

• President Joe Biden will reinstate coronavirus travel restrictions against foreign citizens coming to the U.S. from Brazil, the U.K, Ireland and much of Europe on Monday, according to multiple reports, and will add South Africa to the list.
• The travel restrictions, first put in place last spring, have barred foreign citizens who have been in Brazil, the U.K., Ireland and the 26 European countries making up the Schengen area in the 14 days prior to their arrival in the U.S.

 EUROPE

• EUR/USD trades near 1.2175 versus 1.2160 in Asia.
• German IFO Expectations for January is seen ticking higher.
• EUR/USD’s recovery rally will likely gather steam if a forward-looking German data beats estimates, overshadowing bearish macro factors.
• The German IFO Expectations index is seen rising to 93.2 in January from December’s 92.8. The IFO Expectations released by the CESifo Group is an early indicator of current conditions and business expectations for the next six months.

The UK

• Meanwhile, in the UK, where the variant first originated, the next phase of its COVID-19 vaccination programme will be released today.
• Covid-19 deaths have been at the highest they’ve ever been — and the more infectious variants could make things much worse.
• GBP/USD picks up bids to keep the bulls hopeful above the short-term key moving average.
• Bullish MACD signals also back the odds to witness fresh high since May 2018.
• Monthly low holds the key to bears’ entry.

AUSTRALIA

• The Therapeutic Goods Administration (TGA), Australia’s medical regulator, gave a green light to Pfizer/ BioNTech COVID-19 vaccine for use in the country on Monday.
• Pfizer’s vaccine met safety, efficacy and quality standards and has been approved for people aged 16 and older, the TGA said.
• Responding to the vaccine authorization, Prime Minister Scott Morrison said, ‘Today’s approval is another big step forward for our community, particularly in the protection of our most vulnerable people.”
• Australia’s Health Minister Greg Hunt said that the TGA had “placed safety above all else” during the approval process.
• “This approval and the upcoming rollout of the vaccine will play an important part in our ability to manage the pandemic in 2021,” he added.
• According to preliminary data, Australia’s export of goods rose 16% mom to AUD 34.9B. Imports of goods dropped -9% mom to AUD 26.0B. There was a goods trade surplus of AUD 9.0B.

CHINA

• Industry experts warn of a probable intervention by the Chinese policymakers in the coming months, in order to stem the appreciation of the yuan.
• “China will intervene to keep the yuan from strengthening much further and then controlling a slow depreciation as the US economy recovers,” Derek Scissors, at the American Enterprise Institute and also Chief Economist at China Beige Book, said.
• Separately, Dan Rosen, a senior associate at the Center for Strategic and International Studies, noted: “There is nowhere for it to go but down. Over the course of 2021, the question will be how much does the renminbi subside against the dollar.”
• Other than that, The People’s Bank of China (PBOC) has set the yuan reference rate at 6.4819 versus Friday’s fix of 6.4617. The USD/CNY pair jumped 0.33% to 6.4810 on Friday.
• As per Global Times, the two largest cities in China – Beijing and Shanghai – will be joining the Digital Yuan project. The capital city’s mayor said that they would be hastening the development of “demonstration zones” for fintech and professional services over 2021. This effort will include promoting a pilot application for the Chinese CBDC, officially called Digital Currency Electronic Payment (DCEP). Shanghai’s mayor also made a similar pledge.

Market Overview:

 Gold

• Despite ending the week in the green, Gold (XAU/USD) bulls remained unconvinced around $1850, thanks to the renewed concerns over the passage of the $1.9 trillion stimulus proposal in the US Congress.

Oil

• Oil was down Monday morning in Asia, recording a second consecutive session of losses as the ever-rising number of COVID-19 cases continued to raise fuel demand worries.
• Brent oil futures were down 0.24% to $55.12 by 10:29 PM ET (3:29 AM GMT), rolling over to the April 2021 contact on Jan. 24. WTI futures inched down 0.10% to $52.22.

Below are the major market moving events for the week:

 All times listed are EST

Monday

3:45: Eurozone – ECB President Lagarde Speaks

4:00: Germany – Ifo Business Climate Index: seen to edge down to 91.8 from 92.1.

Tuesday

2:00: UK – Claimant Count Change: previous print came in at 64.3K.

10:00: US – CB Consumer Confidence: expected to edge up to 89.0 from 88.6.

19:30: Australia – CPI: to drop by more than half QoQ, to 0.7% from 1.6%.

Wednesday

8:30: US – Core Durable Goods Orders: probably crawled up to 0.5% from 0.4%.

10:30: US – Crude Oil Inventories: previous weekly reading showed a drawdown of -1.975M.

14:00: US – Fed Interest Rate Decision: forecast to remain steady at 0.2%.

Thursday

8:30: US – GDP: predicted to plummet to 4.0% from 33.4%

8:30: US – Initial Jobless Claims: anticipated to decline to 878K from 900K.

10:00: US – New Home Sales: seen to rise to 860K from 841K.

Friday

4:00: Germany – Unemployment Change: expected to surge to 3K from -37K.

8:30: Canada – GDP: to remain steady at 0.4% MoM.

10:00: US – Pending Home Sales: seen to rise to -0.6% from -2.6%.

Saturday

20:00: China – Manufacturing PMI: to edge up to 52.0 from 51.9.

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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