· Dollar retreats from one-month high as traders eye Biden’s forex policy
The dollar slipped from close to its highest in nearly one month on Tuesday as caution set in before U.S. Treasury Secretary nominee Janet Yellen testifies later, with traders keeping a close eye on the policies of the incoming Joe Biden government.
The greenback weakened against most major peers as stocks in Asia rallied, lifting risk sentiment and curbing demand for safe-haven currencies like the dollar and Japanese yen.
The dollar index slipped about 0.1% to 90.708 in the Asian session, a day before U.S. President-elect Joe Biden is set to be inaugurated.
On Monday, the gauge ended 0.1% lower after earlier climbing to 90.94 for the first time since Dec. 21, as the Wall Street Journal reported Yellen will affirm a more traditional commitment to market-set currency rates in a Senate testimony on Tuesday.
That’s in stark contrast to outgoing President Donald Trump, who often railed against dollar strength.
Many analysts expect the dollar to resume its march lower this year.
“We’ve seen comments from Janet Yellen that she won’t be pursuing a weak dollar policy per se, but that doesn’t mean that the overall impact of Fed policy won’t keep the dollar weakening,” said Michael McCarthy, chief strategist at broker CMC Markets in Sydney.
“I suspect what we’ve been seeing in the dollar at the moment is a minor corrective rally in an overall downtrend.”
The greenback has also been supported recently by an unwinding of bearish bets, with data showing that hedge funds piled up the biggest net short position since May 2011 in the week ended Jan. 12. Such large positions suggest that traders would be relatively more inclined to reduce their positions than add to already big bets.
The euro rose 0.2% to $1.2095, after dipping to $1.2054 for the first time since Dec. 2 on Monday, in subdued trading with U.S. markets closed for Martin Luther King Jr. Day.
The riskier Aussie dollar rose 0.3% to 77.082 U.S. cents, reversing a decline of more than 0.2% overnight.
The dollar gained 0.3% to 104.05 yen, although still consolidating in a narrow range after reaching a one-month high of 104.40 last week.
· EUR/USD testing 1.2100 amid USD pullback, ahead of ZEW, Yellen
- EUR/USD attempts recovery as the USD bulls turn cautious.
- Stimulus hopes-driven risk-on mood weighs on the greenback.
- Next of note remains the German ZEW, Yellen’s hearings.
EUR/USD trades close to 1.2100, holding onto the recovery mode ahead of the European open. The recovery in the risk sentiment amid expectations of additional fiscal stimulus is weighing on the safe-haven US dollar.
Looking ahead, the major will remain at the mercy of the US dollar dynamics and risk trends ahead of Yellen’s testimony. In the meantime, the German ZEW survey could keep the EUR traders somewhat busy.
EUR/USD technical levels
“Any further upside past-1.2100 needs to cross the falling wedge’s resistance line, at 1.2116 now, to recall the EUR/USD buyers eyeing to refresh the multi-month high above 1.2349. On the contrary, the quote’s U-turn from present levels will have strong support around 1.2045/40 area including the pattern’s lower line and December 02 trough,” FXStreet’s Analyst Anil Panchal notes.
· U.S. Inauguration Day 2021
Inauguration Day is a public holiday in 3 states and 1 federal district, where it is a day off for the general population, and schools and most businesses are closed.
Inauguration Day has been held on January 20 and the term of office officially starts at 12:00 noon on that date.
Usually, the vice-president is sworn in first and the president at exactly 12:00 noon. After they have been sworn in, the president and vice-president are given four ruffles and flourishes.
The new terms of office of the president and vice-president officially begin at noon in Washington DC.
On Inauguration Day the candidates, who won the elections in the previous year, are sworn into office as president and vice-president of the United States. The swearing-in ceremony takes place at the U.S. Capitol and is organized by the Joint Congressional Committee on Inaugural Ceremonies. It is usually followed by a parade along Pennsylvania Avenue.
The new president watches the parade from the presidential viewing stand in front of the White House. The route of the parade is often lined by thousands of people. However, many Americans watch the ceremony on television or listen to it on the radio.
· Biden Covid advisor challenges Cuomo’s letter to buy vaccine directly from Pfizer
President-elect Joe Biden’s Covid Advisory Board member Dr. Celine Gounder slammed the Trump administration’s piecemeal Covid response as some states across the U.S. scramble to get the vaccine doses they need.
“I think we’ve already had too much of a patchwork response across the states,” Gounder said in a Monday evening interview on “The News with Shepard Smith.”
In a Friday coronavirus briefing, New York Gov. Andrew Cuomo said the federal government is sending his state 50,000 fewer doses of the vaccine than the week before. The state was getting fewer doses as the Centers for Disease Control and Prevention expanded vaccine eligibility to anyone over the age of 65 on Jan. 12.
On Monday, Cuomo sent a letter to Pfizer asking if the state of New York could buy vaccines directly from the company. Last week, Michigan Gov. Gretchen Whitmer made a similar request to Health and Human Services Secretary Alex Azar.
Gounder told host Shepard Smith that this approach could cause more problems than it solves.
Cuomo, a Democrat, blamed the Trump administration for failing to send enough vaccine doses to his state. This week, he said, New York would receive 250,000 doses — 50,000 fewer than the week before.
· Joe Biden ignores Donald Trump's attempts to relax Covid travel ban
Donald Trump has said he will be relaxing Covid travel restrictions from the UK, Europe and Brazil after he leaves office - a move his successor Joe Biden said will be overruled.
· Yellen urges Congress to do more to fight pandemic recession
· China's latest COVID outbreak worst since March 2020
China is battling the worst outbreak of COVID-19 since March 2020, with one province posting a record daily rise in cases, as an independent panel reviewing the global pandemic said China could have acted more forcefully to curb the initial outbreak.
State-backed tabloid the Global Times on Tuesday defended China’s early handling of COVID-19, saying no country had any experience in dealing with the completely new virus.
China reported more than 100 new COVID-19 cases for a seventh day on Tuesday. Mainland China posted 118 new cases on Jan. 18, up from 109 a day earlier, the national health authority said in a statement.
Of those, 106 were local infections, with 43 reported in Jilin, a new daily record for the northeastern province, and 35 in Hebei province, which surrounds Beijing, the National Health Commission said.
The Chinese capital itself reported one new case, while Heilongjiang in the north reported 27 new infections.
· Independent pandemic review panel critical of China, WHO delays
An independent panel said on Monday that Chinese officials could have applied public health measures more forcefully in January to curb the initial COVID-19 outbreak, and criticised the World Health Organization (WHO) for not declaring an international emergency until Jan. 30.
· Japan's Shizuoka Prefecture to Introduce Alert Mode Over UK Coronavirus Variant
The Shizuoka Prefecture in Japan is set to declare high alert over the spread of the UK strain of the coronavirus, which was recently found in people with no record of travelling to the United Kingdom, the public broadcaster NHK reported on Tuesday.
· Hong Kong leader Carrie Lam says city to extend social distancing measures
On Monday, Hong Kong reported 107 new cases of coronavirus, the highest number in nearly a month, fuelling concern over a new wave of infections in the densely populated city where businesses are already reeling from restrictions.
· Brazil vaccinations start as country faces vaccine ingredient shortfall
Brazil kicked off a nationwide COVID-19 immunization program on Monday by distributing doses of a vaccine from China’s Sinovac Biotech following an emergency use authorization, although the pace of vaccination will depend on delayed imports.
· Duterte says Filipinos can use Pfizer vaccine, but touts Sinovac deal
Philippine President Rodrigo Duterte said on Monday he would not stop Filipinos from getting shots of the COVID-19 vaccine made by Pfizer and BioNTech, despite reports in Norway of deaths among frail elderly people after being inoculated.
· Trump orders assessment of security risks of Chinese drones
President Donald Trump on Monday signed an executive order directing U.S agencies to assess any security risks from Chinese-made drones in American government fleets and to prioritize removing them.
Trump directed all U.S. agencies to outline the security risks posed to the existing government drone fleet from drones built by Chinese companies or by other countries deemed foreign adversaries, including Russia, Iran and North Korea.
Trump’s order also directs agencies to outline “potential steps that could be taken to mitigate these risks, including, if warranted, discontinuing all federal use of covered (drones) and the expeditious removal of (drones) from federal service.”
· Reuters poll: Canada's economic recovery falters amid renewed COVID-19 restrictions
Canada’s economy will hit a major roadblock during the first quarter of 2021 before gaining momentum in the next quarter, according to economists in a Reuters poll who said the country’s GDP would reach its pre-pandemic growth levels within a year.
· Germany regrets U.S. decision to sanction Russian vessel involved in Nord Stream 2
The United States has informed Germany that it plans to impose sanctions on a Russian pipe-laying ship involved in construction of the Russian-led Nord Stream 2 gas pipeline from Russia to Germany, the German Economy Ministry said on Monday.
· Foreigners poured money into China as the world struggled with the coronavirus pandemic
Foreign direct investment set for record high
Businesses also put more money into projects in China last year, as measured by foreign direct investment.
As of November, foreign direct investment for 2020 reached $129.47 billion, more than the same period a year ago, according to official data. That puts China on track for record-high foreign direct investment last year, according to estimates from Macquarie released Thursday.
China recorded $138.13 billion in foreign direct investment in 2019, up from nearly $135 billion in 2018, according to data from Wind Information. Official figures for 2020 from the Ministry of Commerce are expected later this month.
In financial markets, foreign investors more than doubled their purchases of Chinese bonds for a record high 1.1 billion yuan in inflows last year, according to estimates from Macquarie.
· China says it will sanction U.S. officials for ‘nasty’ behavior on Taiwan
China will impose sanctions on U.S. officials who displayed “nasty” behavior over the issue of Taiwan, the Chinese foreign ministry said on Monday, according to CNBC’s translation.
The decision was revealed by the foreign ministry’s spokewoman, Hua Chunying, in response to a reporter’s question on what China would do in response to the U.S. lifting restrictions on its relations with Taiwan.
U.S. Secretary of State Mike Pompeo had earlier this month announced that his country will no longer limit contact between its officials and their Taiwanese counterparts. China slammed the decision and vowed to fight back.
· BOJ's policy review may make ETF buying more flexible: Reuters poll
The Bank of Japan will likely focus on measures to make its purchases of risky assets, such as exchange-traded funds (ETF), more flexible as the economy comes under growing strain from a spike in COVID-19 infections, a Reuters poll found.
Analysts polled also revised down their economic projection for the fiscal year ending in March on expectations a recent resurgence of coronavirus infections would dent growth.
Economic activity could stall in the world’s third-largest economy from pandemic curbs and the BOJ may have to look at more effective ways to achieve its 2% inflation target as renewed infections force it to maintain its massive stimulus longer, analysts said.
The central bank said last month it would undergo an examination of its yield curve control and quantitative easing policies to seek ways to make them more “effective and sustainable”. Its findings will be released in March while new GDP estimates will be issued at its Jan. 20-21 policy meeting.
Reference: CNBC, Reuters, LBC, Sputnik News, ForexCrunch
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