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Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Here is what you need to know on Friday, January 15:

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. US retail sales, consumer confidence, and other figures compete with coronavirus figures for impact on markets. 

Fiscal stimulus: President-elect Joe Biden presented a $1.9 trillion relief package as expected. The scope of the plan – the first of a two-pronged approach – was already priced in by markets. Moreover, the incoming Commander-in-Chief talked about people "paying their fair share" and investors are concerned about rate hikes. It is also unclear how much of the plan can be approved as Democrats have thin majorities in Congress.

Monetary stimulus: Jerome Powell, Chairman of the Federal Reserve, clarified that rate hikes are not coming anytime soon, nor is tapering of bond-buys. US Treasury yields are on the back foot, weighing on the greenback until the market mood soured.

Gold has been clinging to $1,850, edging higher amid prospects of more fiscal and monetary stimulus.

US data: Weekly jobless claims badly disappointed with a leap to 965,000, the highest since the summer, and a result of coronavirus, which continues raging in the US. The focus now shifts to the consumer. Retail Sales figures for December are forecast to have remained mostly unchanged after falling in November. 

US Retail Sales December Preview: Sales will track job losses

Industrial output has likely continued its upward march, as the sector is less impacted by the virus. Finally, the University of Michigan's preliminary Consumer Sentiment Index statistics for January will likely show a small decline. 

See US Consumer Sentiment Preview: Expectations look rich, dollar could receive a (second) blow

UK: Britain is set to further accelerate its vaccination campaign next week. Prime Minister Boris Johnson is under pressure from a group of MPs pushing to loosen the lockdown. The recent measures are beginning to bear fruit, as cases are declining. 

Virus strains: Britain banned travel from South America and Portugal amid concerns about a new, Brazilian variant. Scientists are unsure if current immunizations are efficient against this new strain, which has ravaged the Amazonian city of Manaus. 

Coronavirus: Statistics, herd immunity, vaccine calendar and impact on financial markets and currencies

Europe: France has announced an early nighttime curfew to enhance social distancing and curb the spread of the virus. German Chancellor Angela Merkel is mulling tightening restrictions as cases and deaths remain elevated. Spanish regions are also imposing new limits in the wake of a post-holidays wave. 

Merkel's CDU party will choose a new leader over the weekend, with moderate Armin Laschet competing with more populist Friedrich Merz. Another candidate is Norbert Röttgen, which could be a compromise one. The country's general elections are due only in September.

Cryptocurrencies: Bitcoin has been retreating from $40,000, suffering a down day after advancing on Thursday. 

Five factors moving the US dollar in 2021 and not necessarily to the downside

Author

Yohay Elam

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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