Forex Today: Markets shrug off Capitol storming, USD rocked by blue wave, NFP hints eyed

Yohay Elam FXStreet

Here is what you need to know on Thursday, January 7:

Markets have been shrugging off the storming of the Capitol by supporters of President Donald Trump. Investors focus on Democrats' win of the Senate after the elections in Georgia, pushing stocks higher. The dollar is torn by a move away from the safe-haven currency and higher yields. Coronavirus and vaccine statistics and jobless claims are eyed.

US politics: The world was shocked to see a mob incited by Trump storming the Capitol and vandalizing it. The president continued making his unfounded claims of fraud and supporters seemed to try to overturn the election results. Police eventually gained control of the event, allowing Congress to continue ratifying President-elect Joe Biden's win.

The process, usually a short ceremonial one, is set to conclude later on Thursday. Stocks fell off the highs as the rioting began, but ended higher while futures are pointing to a positive open on Wall Street.

Fiscal stimulus coming: Democratic candidates Raphael Warnock and Jon Ossof won their Senate runoff races in Georgia, allowing their party effective control of the upper chamber. That allows President-elect Joe Biden to push additional relief packages and markets are cheering.

The US dollar has been having a mixed reaction. On the one hand, the safe-haven currency was sold off – yet it recovered as bond yields climbed on prospects of higher government debt. Ten-year Treasuries hold their ground above 1%. Gold has also been whipsawed, failing to hold onto gains.

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

The Federal Reserve's meeting minutes from the December meeting conveyed a balanced message, with some members ready to expand the bank's bond-buying scheme and others willing to consider tapering it down. The Fed remains on hold.

ADP's private-sector jobs report showed a disappointing loss of 123,000 jobs in December, lowering expectations for Friday's Nonfarm Payrolls. The data contradicts the upbeat ISM Manufacturing Purchasing Managers' Index for last month.

The ISM Services PMI, due out on Thursday, provides the final hint toward the official labor figures. Weekly jobless claims for the week ending January 1 are also of interest.

Coronavirus continues raging in the northern hemisphere. Britain is struggling more than other countries, yet it is ramping up its vaccine distribution. GBP/USD is trading below 1.36, also amid England's strict lockdown.

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

EUR/USD is battling the 1,23 level, driven mostly by the dollar. Preliminary eurozone inflation figures for December are set to remain subdued. German Factory Orders surprised with an increase of 2.3% in November.

Bitcoin has been extending its gains, hitting new highs above $37,000. Ethereum is also holding its gains near $1,200.

Author

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.

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.