Forex Today: Dollar holds onto gains, shrugging off upbeat Chinese GDP, vaccine news eyed

Here is what you need to know on Monday, January 18:

Markets are mixed on "Blue Monday" with the dollar clinging to gains related to risk aversion, while upbeat Chinese growth partially offsets the gloom. The UK and the US are ramping up their vaccination campaigns while tension is mounting ahead of President-elect Biden's inauguration. US markets are closed.

The greenback is holding onto its higher ground after disappointing US Retail Sales and Jobless Claims triggered a light-to-safety move at the end of last week. On the other hand, stocks are cheering China's Gross Domestic Product, which grew at an annualized pace of 6.5% in the fourth quarter of 2020. The world's second-largest economy returned to pre-pandemic growth levels.

EUR/USD has been changing hands under 1.21, as investors follow Italy's ongoing political crisis. Prime Minister Giuseppe Conte's government is facing votes of confidence. In Germany, Chancellor Angela Merkel's CDU Party chose centrist Armin Laschet as party leader, en route to the general elections in September. The European Central Bank's decision is awaited on Thursday. 

GBP/USD is below 1.36, shrugging off the rapid expansion of Britain's vaccination campaign, which has already neared 6% of the population. Talks between the EU and the UK on post-Brexit arrangements for services are set to advance at a snail's pace. 

The big event of the week is the inauguration of President-elect Joe Biden on Wednesday. Investors are shrugging off fears of violence from supporters of outgoing President Donald Trump, and eyeing a flurry of Executive Orders from the incoming administration.

Biden will also attempt to pass his proposed $1.9 trillion relief package. Janet Yellen, the nominee for Treasury Secretary, is set to declare that dollar policy would be "market-oriented" potentially allowing the greenback to decline. 

Jerome Powell, Chairman of the Federal Reserve – and Yellen's successor – committed last week to highly accommodative policy. 

See Powell may pummel the dollar after a trio of troubling figures boosts its safe-haven appeal

The Canadian dollar is on the back foot in response to media reports that the incoming Biden administration would cancel the Keystone XL pipeline. The Bank of Canada announces its decision on Wednesday. 

Gold has been edging higher on expectations of both monetary and fiscal stimulus, recovering from the lows. 

Cryptocurrencies have been trading on lower ground, with Bitcoin hovering around $35,000. 

US traders are off on Monday due to Martin Luther King Day, prompting thin trading volume in the US session.