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.
How does the American CPI reflect the virus impact?
On Wednesday, the US monthly inflation will be announced at 14:30 MT time.
Instruments to trade: EUR/USD, USD/JPY, GBP/USD, USD/CAD
In the last four months, inflation in the US hasn’t been deviating from 2.3%, which must reflect the stability of the US economic expansion and the Fed’s monetary policy. This time inflation may tell much about the current situation. Primarily, coronavirus may cool down the US economic expansion lowering the internal consumption and slowing the production process. If that’s the case, inflation will become subdued. And that will be a preliminary indicator of how indeed the virus outbreak impacts the US economy and the USD. That, in turn, should contribute a lot to the US Fed’s rate decision on March 18.
- If the inflation is stable, the USD may be supported.
- If the inflation is lower than expected, the USD may be suppressed.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.
The main market tendency today is that the US dollar is rising against its major peers and riskier assets such as stocks and oil are plummeting.
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.