Dollar firms in a risk-off market, equities lower
The dollar is starting the week firm, extending last week’s gains triggered by the assault on the Capitol. The risk-off mood is fueled by Democrats poised to introduce articles of impeachment against President Trump. US-China tensions soared after yesterday’s decision by the Trump administration to remove long-standing restrictions on official US-Taiwan contact. US Treasury 10-yr yields are trading near recent highs at 1.12%, also dollar supportive. US equities opened lower, with Twitter falling 7% in pre-market trading after they permanently banned President Trump. Oil is lower and gold unchanged.
Monday: Bank of Canada Business Outlook Survey (Q4)
Wednesday: US Consumer Price Index (Dec), Eurozone Industrial Production (Dec)
Thursday: President-elect Biden's proposal for fiscal spending, US Initial Jobless Claims (Jan 9)
Friday: US Retail Sales, Industrial Production, Consumer Sentiment (Dec), Canada Existing Home Sales (Dec)
January 11, 2021
EUR/USD 1.2145 GBP/USD 1.3461 USD/CAD 1.2827 AUD/USD 0.7674 USD/JPY 104.32 USD/CNH 6.4820 USD/ILS 3.1796 USD/MXN 20.1889 USD/CHF 0.8911 USD/INR 73.3850
The Dollar index rose 0.5% over the weekend, and is up 1.3% from early last week’s low. The risk-off mood in the markets is driving investors to the safety of the dollar. There is a full slate of US economic data to be released later in the week. Short dollar bets by speculators had reached multi-year extremes, so part of the rally may be due to short-covering.GBP
England is facing a worsening surge in Covid-19 deaths. More than 81,000 people have died in the UK, fifth highest in the world. Prime Minister Johnson may further tighten an already restrictive lockdown that is scheduled to end on February 15. The UK pound is lower by more than 1.5% after peaking near $1.37 early last week. Traders continue to ponder the risk of the Bank of England dropping rates into negative territory.EUR
The euro is lower by 0.6%, less than most of its peers. The focus is on new Covid-19 restrictions as vaccine deployment continues. ECB President Lagarde will speak this week, and minutes from last month’s ECB meeting are made available.CAD
The Canadian dollar is lower for the fourth straight day amid a broadly stronger US dollar. Traders await today’s Bank of Canada business outlook data.ASIA/PACIFIC
The Chinese yuan moved little overnight despite China warning the Trump administration of heading down a dangerous path after lifting curbs on official talks with Taiwan.
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