The Friday Forex Takeaway - Episode 71
Key Points from This Week
Equities Soar on Stimulus Expectations
US equities indices broke out to fresh highs again this week as Biden continues to push ahead with his proposed $1.9 trillion stimulus package. Following approval in the lower chamber of Congress last week, Biden is now aiming to secure backing in the Senate by March. Provided the president doesn’t lose any centrists in his party, he should be able to secure the necessary majority, which is what equities traders are currently anticipating.
Biden Talks to Chinese Premier Xi
Biden made his first communication with Xi this week as the new president of the US.While not much has been shared in the way of details, the two leaders both urged the need for co-operation while Biden is said to have addressed Xi over his concerns around COVID and human rights issues which are both topics Beijing warned the US not to interfere with.
US Inflation Weakens in January
US inflation fell back in January with core inflation printing 0% while the headline figure came in at 0.3%, in line with expectations. US inflation has drawn plenty of attention recently with any economists expecting a shar pickup over coming months, due to put pressure on the Fed. The Fed, however, has said that it is willing to allow a small overshoot in CPI.
UK Avoids Double Dip Recession
The latest growth data for the UK showed that the economy printed growth of 1% in Q4, avoiding a double dip recession, which many had feared. While growth data for 2020 as a while was the worst on record at -9.9%, the BOE is confident that the UK will enjoy a strong recovery from Q2 onwards.
Key Events Next Week
US Retail Sales
US retail sales will be closely watched next week. Given that the reading is key component of the GDP figure, traders will be keen to see how the US weathered the storm over the last month. Headline retail sales were seen at -0.7% on the prior month while core sales were lower at -1.4% .
US, UK & EZ PMIs
The next round of PMI readings next week will be the headline focus for traders. Markets will be particularly keen to see how the UK and EZ performed given the ongoing lockdowns there. The manufacturing sector in particular has remained resilient throughout the pandemic, driven by the surge in online shopping and should continue to hold the readings up this time around also.
Keep an Eye On
Incoming COVID Data
Traders are continuing to gauge a likely ending point to lockdowns in the UK and EZ. With deaths and infections dropping, there is a growing call for measures to begin easing over the end of this month. This pressure is likely to increase if data continues to trend lower.
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