USD
We are set for a volatile week with several high impact data releases due over the next few days with the added pressures from testimonies and speeches by Federal Reserve policymakers.
Last week the DXY added a +0.07%, a small rise compared to the epic run it had last month, most of these gains were lost by the end of the week with the release of the mixed December Nonfarm Payrolls. The figures were worse than expected with the economy adding 199K jobs, lower than the 400K forecasted by analysts. But the Unemployment Rate improved, from 4.1% down to 3.9%, hitting a 22-month low which balanced the negative impact of Payrolls. Regardless this underwhelming data and new restrictions due to Omicron may cause some delay to the expected interests rates to hike in March 2022. Expect some volatility for USD in the market this week.
GBP
The continued Dollar weakness after the mixed December Nonfarm Payrolls report helped GBP/USD as it closed last week at 1.3550. GBP held its gains as London – the Omicron epicentre – was declared “past the peak” easing pressure on Sterling and the wider market by diminishing any chances of further restrictions. This could also set up GBP for more upside against the Dollar early in the week.
Possible breakdowns in Brexit negotiations regarding Northen Irland could create some bearish news for Sterling but at this stage, it looks more like political posturing than producing anything impactful. Instead, we focus on the end of the week announcements for GDP, Manufacturing and Production which will have an immediate short term impact on Sterling.
EUR
As with other majors, the Euro was boosted by the weakened US Dollar after the release of Jobs data last week with the potential to rise higher further based on the outcome of the upcoming speeches from the Fed and ECB.
The ECB and Fed are on diverging paths with regards to inflation with speculation that the Fed could raise hikes in March and a further 3 more before the year’s end whilst the ECB won’t be normalising policy until next year.
A speech for ECB’s President Lagarde scheduled for Tuesday will add to volatility this week, with hawkish news benefiting the EUR whilst a Dovish outcome could weaken gains.
KEY EVENTS THIS WEEK:
Tuesday 10th January
EUR – ECB’s President Lagarde speech
USD – Fed’s Chair Powell testifies to congress
Wednesday 11th January
USD – Consumer Price Index ex Food & Energy (MoM)(Dec)
Thursday 12th January
EUR – Economic Bulletin
USD – Producer Price Index ex Food & Energy (YoY)(Dec)
USD – Fed’s Brainard speech
Friday 13th January
GBP – Gross Domestic Product (MoM)(Nov)
GBP -Industrial Production (MoM)(Nov)
GBP – Manufacturing Production (MoM)(Nov)
USD – Retail Sales (MoM)(Dec)
USD – Michigan Consumer Sentiment Index(Jan) PREL