11th January 2021 – USD appreciation ahead of Powell’s and Biden’s talking about the economy

Walid Salah Eldin

Active member
The Greenback is still boosted by the rising of UST yields which has been underpinned by unexpected increasing of the wages inflationary pressure in December.

After Dec US labor report has shown average hourly earnings for all employees on private nonfarm payrolls rising by 23 cents to $29.81 by 0.8% and 5.1% y/y.

The markets started to focus on the accumulating inflation pressure in US, following that release which drove UST yield from 1.04% to 1.12%, despite unexpected losing of 141k out of the farming sector has been highlighted in the same report.

The worries about inflation and the odds of QE tapering by the Fed can make the markets focused on the release of Dec US CPI next Wednesday to know more about the inflation pressure.

But you have to know that the Fed’s preferred gauge of inflation is the core PCE figure excluding food and energy not CPI and you have to know also that the Fed's chief Powell has outlined at Jackson Hole symposium last August a new strategy letting inflation to run hotter than normal in order to support the labor market and the broad economy prioritizing employment over price rises, showing tolerance about its normal 2% yearly expansion target it adopts over the medium term.

Jerome Powell, Chairman of the Federal Reserve will be speaking next Thursday and the markets participants will be keen to know, if there is any change for his represented premature view about the inflation can lead to earlier than expected rising of rates or tapering of its QE.

Specially as the government is expected to play a greater role to stimulate the economy by new reflation plans to face the virus negative consequences on the economy, after flawless Dems winning of House and Senate majority.

So, The markets will be focused also on The president-elect Joe Biden next Thursday, when he is to announce his new government plans for boosting the economy and the way of funding it which is more important to the market as unknown important element can cause rising of the taxes as Dems used to do. Otherwise, that can lead to further debt burden to be carried hurting the already hurt US creditability by $27.778tr of debt and driving up UST yields in the secondary market and the cost of borrowing USD which can carry higher risks over time.

In the same time, the markets will be surely un-ignorant of COVID-19 sluggish pace of vaccinating the first dose which reached 1% in Europe and 2% in US! and the news of Trump’s impeachment in his term last days, after he had prompted historic mob storming of Capitol Hill!!

The uncertainty about Covid-19, the funding of Dems reflation plans and the talking about unpriced earlier Fed’s Qe tapering action can weigh down on the market sentiment.

UST rising made USD in better position against all of its rival currencies and also gold which resumed its retreating to $1817 earlier today.

While BTCUSD is still retreating affected by severe expected awaited correction, after robusting prolonged rising reached 41987 last Friday, BTC is still looking away from stabilizing, while many investors found it good atmosphere to take profits buying USD back looking forward for detecting a new higher low to join a new uptrend wave as they used to!

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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