RBC Capital Markets

Week ahead: The US Georgia Senate races conclude tomorrow, and the opinion polls are very tight. If the Democrats manage to win both seats, and thereby secure control of the Senate, it will stoke market expectations of another fiscal stimulus. The consensus expectations for the US employment report (Friday) are rather downbeat, with payrolls only projected to rise 50k on average. Both ISM readings are also expected to post small declines from the November figures. Finally, there is the FOMC December meeting minutes (Wednesday). Other key data releases include the services PMIs worldwide, Germany & euro area ‘flash’ CPIs (see EUR), and Canada employment report (see CAD).

EUR: The Germany preliminary CPI (Wednesday) release will set the tone for the following euro area flash CPI inflation (Thursday). Both are expected to bounce slightly (consensus -0.6% y/y and -0.2% y/y respectively) on rising fuel costs in December. Germany factory orders (Thursday) is another notable data release.

GBP: The multi-year Brexit drama is finally behind us. The final readings of the December PMIs – manufacturing, services & construction - are due this week. BoE representatives will discuss the financial stability report at the Treasury parliamentary committee on Wednesday. CHF: A slew of Swiss data releases over the week, namely CPI inflation (Tuesday), unemployment rate and retail sales (both Thursday).

AUD: Apart from the PMIs, the Australia November building approvals and trade balance data (both Thursday) will be out this week.

CAD: Consensus forecasts average a -20k net change in the December employment report (Friday), and the unemployment rate edging higher to 8.6%. The effects of the worsening Covid-19 situation into year-end and new restrictions in Ontario are expected to manifest in the report.

Natixis

  • Dollar starts 2021 in the cellar with a hangover
  • Dollar softens against most majors; virus worries lift yen
  • Focus turns to Georgia Senate race
  • Bitcoin steadies after weekend records

The dollar started the new year by slipping broadly on Monday as investors sold it for just about everything else in the Asia session, wagering the world's pandemic recovery will drive other currencies higher. The euro, which had dipped on New Year's Eve profit-taking, rose 0.3% to $1.2252. Sterling firmed to $1.3698, levels last seen in early 2018, and the Chinese yuan leapt 0.9% to a 30-month high of 6.4647 per dollar. The safe-haven yen rose 0.3% to 102.94 per dollar, and looked to test resistance at 102.55, after Japan's Prime Minister, Yoshihide Suga, said his government is mulling a state of emergency in Tokyo as infections rise. The Australian and New Zealand dollars each gained about 0.3% to hold just below multi-year peaks. "I think he market is still in this look-through mood," said Bank of Singapore currency analyst Moh Siong Sim. "People are looking through pockets of bad news, and the virus resurgence, because of a few things that are supportive," he said, chiefly referring to the vaccine rollout but also mentioning U.S. stimulus and the Brexit trade deal. Low U.S. interest rates, massive U.S. budget and trade deficits and a belief that rebounding world trade will drive nondollar currencies higher have set the dollar on a downward course that has gathered pace as more investors piled in. The dollar index posted its first annual loss since 2017 last year and has fallen roughly 13% from a three-year peak hit at the height of the pandemic panic in March. It was last 0.08% weaker at 89.688 and not far above a more than 2-1/2 year low of 89.515 made last week

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other roup or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.