Viewpoint Kathy Lien 25_01

Tradehay.com: 25/01/2021 - 09:59

The US dollar appreciated against all major currencies on Friday as stocks fell

Three days after the new administration went into operation, investors began to worry about the possibility that President Biden could pass the 1.9 trillion stimulus package. USD and 100 million doses of vaccine in his first 100 days. Vaccine rollout has slowed and many states have been affected by supply constraints. Republican leaders are also pushing back on the stimulus with Mitt Romney saying "he doesn't expect a new program in the future" and GOP Sen. Roy Blunt calls the plan a one without. Prospects. In order to maintain risk aversion, successful vaccine implementation and an active stimulus package are essential.

The Federal Reserve meets this week and they will be watching all of this very closely. Unfortunately we don't expect any progress, the central bank will probably choose a stable “dovish” policy. Despite the number of Covid-19 infectionsrecord breaking in December, US economic reports were not so lousy. Manufacturing and services sector activity accelerated in January, according to Markit Economics. Existing home sales have bounced back, which is in line with the strength we saw earlier this week in house start-ups and building permits. The Philadelphia Fed survey nearly tripled at the start of the year, and with stocks hovering near record highs, there is little reason for immediate concern. In fact, like the ECB and the Bank of Canada, the Federal Reserve will talk about short-term risks but emphasize the possibility of a strong recovery. This may provide some short-term support for the dollar but the prospect of more stimulus and a larger financial deficit will limit the greenback's momentum.

Extensive blockades in Europe have failed to halt a regional recovery. According to the latest reports, the German economy expanded last month and although it was slower than the previous month, it was stronger than expected. Manufacturing activity continues to grow while service slows down. For the Eurozone as a whole , manufacturing also led the gains. All of this shows thatEUR , the best performer of the day can start off on Monday with a strong momentum.

The UK, on ​​the other hand, has seen a significant contraction in manufacturing and services. The Markit PMI index fell from 50.4 to 40.6, the lowest level since June. This decline is due to weaknesses in the manufacturing and service sectors. UK retail sales were also softer than expected, with spending growing only 0.3% in December against expectations for a 1.2% increase.

The worst performing currencies are CAD andAUD . Although retail sales increased significantly in November, USD / CAD ended the day above 1.27. Consumer spending rose 1.3% against the forecast of 0.1%. Part of Loonie's weakness could be attributed to the possibility of worsening December data since a large portion of the country is being frozen. Aussie and Kiwi plummeted. Although Markit Economics did report more aggressive aggregate and manufacturing PMIs for Australia, retail sales fell more than expected in December, a sign of warm weather and declining viral infections. also unable to boost consumer demand. Inflation in New Zealand rose but manufacturing decreased for the first time since May.

Kathy Lien