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Last week was a quiet one for currency markets as Joe Biden’s inauguration as US President went smoothly and vaccination programmes continued.
Concerns that Biden’s stimulus plan to boost the US recovery is being watered down in Congress slowed the recent momentum of the US dollar.
The European Central Bank’s (ECB) acknowledgement of the euro’s over-strengthening has also had a ripple effect on currencies, even though no monetary policy changes were announced.
Dollar slips
The Dollar Index (DXY) opened the week at highs of almost 91 but slipped to back to the 90 level as the week wore on.
Pound rises
The dollar’s slide saw the pound gain in value to around the US$1.37-mark last week, while it also rose against the Euro to around €1.13.
Bitcoin volatility
Christine Lagarde and Janet Yellen, Biden’s choice to be the next US Treasury Secretary, both hinted at increased regulation on the use of cryptocurrencies.
This sparked a sharp fall in the value of Bitcoin and other cryptos, with Bitcoin slumping in value from $37,700 to below $30,000 at one point. It opened this week valued at around $33,500.
This kind of volatility will only increase distrust of the asset among policymakers, despite recent speculation that it was starting to become a more reliable asset for long-term investors.
Precious metals
Gold and silver both recovered slightly in value slightly due to the slowing of the US dollar’s resurgence and the volatility of cryptocurrencies.
Gold is today valued at US$1,856 per ounce and silver at $25.66.
Week ahead
Markets should be calmer at the moment as risk around the UK’s departure from the EU and the US Presidential inauguration have subsided.
Any prospect of growth continues to be dampened by the ongoing Covid-19 crisis.
Jobless numbers are expected to increase tomorrow in the latest UK employment data figures, which covers the period in which the furlough programme was expected to end leading many firms to cut staff.
Economic Data
Highlights this week include:
Today (25 January)
- German business sentiment survey from the Ifo Institute for Economic Research
- Speeches from:
- ECB President Lagarde and members of the executive board
- Bundesbank President Weidmann
- Bank of England (BOE) Governor Bailey
Tuesday
- UK employment report
- US consumer confidence report
Wednesday
- US durable goods orders and crude oil inventories
- Federal Open Market Committee (FOMC) interest rate decision
- Federal Reserve (FED) chair Powell press conference
Thursday
- German Consumer Price Index
- US Q4 GDP, weekly jobless numbers, trade balance, and new homes sales
Friday
- German Q4 GDP and employment report
- US personal consumption report and pending home sales
