The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
5 important events this week will bring us!
- A monetary policy statement by the Bank of Japan (Tue, Asian session) – The rate changes are not expected, but the BOJ governor may provide comments on the future changes to the current monetary policy. Comments on further easing will make the JPY weaker.
- Chinese manufacturing PMI (Wed, 4:00 MT (1:00 GMT) time) - According to the forecasts, the indicator will advance to 49.6. Higher figures will increase the risk-on sentiment in the market.
- FOMC statement (Wed, 21:00 MT (18:00 GMT) time) – The market anticipates the rate cut by 25 basis points from 2.5% to 2.25%. Besides, we need to pay attention to the tone of the Fed chair and the hints on the further steps by the regulator. If Federal Reserve cuts the interest rate, the USD will go down. On the other hand, if the rate changes are postponed, the USD will be supported.
- Monetary policy summary by the Bank of England (Thu, 14:00 MT (11:00 GMT)) – The bank won’t change the interest rate, but we will pay attention to the tone of the BOE amid the weak British pound, global easing of other central banks and uncertainties surrounding Brexit.
- US employment data (Fri, 15:30 MT (12:30 GMT) time) – As usual, the report will include the level of average hourly earnings, unemployment rate and, of course, non-farm employment change or non-farm payrolls. While average hourly earnings and unemployment rate are expected to remain stable, the level of NFP is forecast to advance by 160 thousand payrolls. Higher figures of NFP and average hourly earnings and lower figures of unemployment rate will push the USD higher.
- The British pound fell to the lowest levels since 2017 after the British policymakers, such as Dominic Raab and Michael Dove commented about the preparations to the no-deal Brexit. On Monday, British PM Boris Johnson met with the First Minister of Scotland and Scottish Conservatives leader and they did not support the idea to leave the EU without a deal.
- The trade talks between the US and China will resume on July 30-31. The key demands of China are the removal of the existing tariffs, a balanced agreement, realistic targets for further trade agreements. At the same time, the US ask for structural reforms to China's economy and the protection of intellectual property rights. As the trade negotiations have stuck after the meeting between Chinese and US presidents in Osaka during G20, we may only wonder whether the upcoming round of negotiations will succeed.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.
USD’s rally takes a pause, while riskier assets are modestly rising.
We are now past the middle of January, and this means that the largest US companies will report their earnings for the fourth quarter and many of them will provide the results of the entire 2020.
Poor US data, slow vaccine distribution, rising virus cases worsened the market sentiment and underpinned safe-haven currencies like the USD, and JPY.