Breaking News
Get 45% Off 0
Is it finally time to sell Nvidia ahead of earnings?
Read More

U.S. Dollar Up On Stronger Data, Stimulus Concerns And Risk Aversion

By Kathy LienForexJan 23, 2021 08:32
au.investing.com/analysis/us-dollar-up-on-stronger-data-stimulus-concerns-and-risk-aversion-200444777
U.S. Dollar Up On Stronger Data, Stimulus Concerns And Risk Aversion
By Kathy Lien   |  Jan 23, 2021 08:32
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
EUR/USD
-0.24%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AUD/USD
-0.58%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/CAD
+0.18%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NZD/USD
-0.52%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USDIDX
+0.23%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
The U.S. dollar rallied against all of the major currencies on Friday as stocks descended from their highs. Three days into the new administration and investors are starting to worry about President Joe Biden’s ability to pass a $1.9-trillion stimulus package and administer 100 million vaccines in his first 100 days. The problem is that vaccine rollouts have been slow, with many states hit by supply constraints. Republican leaders are also pushing back on the stimulus package, with Mitt Romney saying, he’s not looking for a new program in the immediate future. And GOP Senator Roy Blunt calling the plan a non-starter. For the risk rally to continue, successful vaccine rollout and an aggressive stimulus package are essential. 
 
The Federal Reserve meets next week, and it will be watching all of this very closely. Unfortunately, we don’t expect any meaningful progress on both fronts by then, which means the central bank will opt for a steadily dovish policy. 
 
Despite record-breaking virus cases in December, U.S. economic reports haven’t been terrible. According to Markit Economics, manufacturing and service sector activity accelerated in the month of January. Existing home sales rebounded, which is consistent with the strength we saw earlier this week in housing starts and building permits. The Philadelphia Fed survey nearly tripled at the start of the year and, with stocks hovering near record highs, there’s little reason for immediate concerns. In fact, like the ECB and the Bank of Canada, the Federal Reserve will talk about near-term risks, but emphasize the possibility of a strong recovery. This could provide some near-term support for the U.S. dollar but the prospect of more stimulus and a larger fiscal deficit will limit gains. 
 
Its official – the widespread lockdowns in Europe failed to curtail the region’s recovery. According to the latest reports, the German economy expanded last month and, while the pace was slower than the prior month, it was stronger than anticipated. Manufacturing activity continued to grow, while services slowed modestly. For the Eurozone as a whole, manufacturing activity also led the gains. All of this suggests that the euro, which was the day’s best performing currency, could start Monday on a strong note. There’s still risk for a pullback though, ahead of fourth-quarter GDP data on Friday. 
 
The UK, on the other hand, saw a significant contraction in service and manufacturing activity. The Markit PMI index dropped from 50.4 to 40.6, the lowest level since June. This deterioration was driven by weakness in the manufacturing and service sectors. UK retail sales was also softer than expected, with spending rising a mere 0.3% in December against expectations for 1.2% rise.
 
The worst performing currencies were the Canadian and Australian dollars. Despite a significant increase in retail sales in the month of November, USD/CAD ended the day above 1.27. Consumer spending rose 1.3% against a 0.1% forecast. Part of the loonie’s weakness can be attributed to likelihood of uglier December data because a large part of the country was on lockdown. The Australian and New Zealand dollars fell sharply. Although Markit Economics reported stronger composite and manufacturing flash PMIs for Australia, retail sales fell more than expected in the month of December, a sign that warm weather and low coronavirus cases failed to bolster demand. Inflation in New Zealand increased, but manufacturing activity contracted for the first time in May.
U.S. Dollar Up On Stronger Data, Stimulus Concerns And Risk Aversion
 

Related Articles

U.S. Dollar Up On Stronger Data, Stimulus Concerns And Risk Aversion

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Apple
Continue with Google
or
Sign up with Email