Forex Today: Yellen's stimulus boosts sentiment ahead of Biden's inauguration, BOC, Bailey eyed

Here is what you need to know on Wednesday, January 20:

The market mood is cheerful with stocks and gold rising and the dollar retreating ahead of Biden's inauguration. Yellen has made the case for more stimulus, boosting sentiment. The BOC is set to leave rates unchanged and the BOE's Bailey is set to speak. Coronavirus continues raging.

Treasury Secretary nominee Janet Yellen appeared before the Senate's Finance Committee for her confirmation hearings and urged lawmakers to "go big." The former Federal Reserve Chair dismissed concerns of debt and supported a market-determined exchange rate for the dollar – a departure from a "strong dollar" policy. Optimism about stimulus has been cheered by markets, weighing on the safe-haven dollar. 

President-elect Joe Biden is inaugurated later in the day and his first actions in office will be closely watched by markets. Apart from promoting the $1.9 trillion relief package, investors await meaningful actions related to the environment or infrastructure. 

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

The Bank of Canada is set to leave its interest rate unchanged in the first such event of 2021. USD/CAD has been hovering around 1.27, with the loonie recovering from Biden's plan to cancel the Keystone XL oil pipeline. Ahead of the BOC, Canada release inflation figures for December. 

See BOC Preview: No change anticipated in interest rate

Andrew Bailey, Governor of the Bank of England, speaks later in the day and may shed light on the current state of the economy. UK inflation rose by 0.6% in 2020, marginally above expectations. COVID-19 cases are edging lower in Britain, but the government insists on maintaining the lockdown until more people get their vaccinations.

US coronavirus deaths have surpassed the grim 400,000 milestone. The silver lining is that pressure on California's hospitals is falling. 

Europe: Germany extended its lockdown through February 14 and other European countries are also considering lengthening their restrictions. Italian Prime Minister Giuseppe Conte survived a vote of no confidence in the Senate, allowing the government to continue. 

Cryptocurrencies: Ethereum is holding onto most of its gains after hitting an all-time high of $1,440 on Tuesday. Bitcoin is hovering around $35,000, off the highs. 

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