Gold 1840,74
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EURUSD 1,2179
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DJIA 30789,50
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OIL.WTI 51,825
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DAX 14078
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The aftermath of the Capitol riots in the US was less than significant. The short-term fall in the markets looked like a small pothole in the road. However, it is worth noting that most of the branches of government have been taken over by the Democratic Party. Will this be a problem for the markets?
EUR/USD
First and foremost, the US government will be able to pass important new legislation more easily. With this in mind, the US Federal Reserve may expand QE significantly in order to support the servicing of government debt. This is a bad signal for the dollar. An additional weakening of the US dollar could lead to so-called currency wars. Neither China nor Europe will want to lose markets so they will try their best to keep up with their currencies.
On January 27, the first minutes of the Fed meeting of the New Year will be released. Until then there is almost no chance of the US dollar strengthening. Chances of a “bearish” trend for EUR/USD in the near future are negligible.
Most leading analysts believe that the downward trend of the dollar will continue throughout 2021. The huge amount of new dollars is likely to bring additional inflation to emerging markets, which will inevitably lead to higher prices, especially for food. The stock market bubble will continue to be pumped with cheap money, which could have unpredictable consequences in the future.
The US labour market remains in focus. ADP data showed a fall of 123k in December, the first fall since April. US Fed is watching the labour market closely and if the trend continues, additional stimulus measures are likely to be taken.
In the short term, hawkish pronouncements by Fed officials may locally strengthen the US dollar as it did on January 7-8. But in the medium term EUR/USD is still targeting the key 1.25 level, so there is a good chance for the bulls to enter the market.
What’s in store for us today?
01.30 Australian retail sales for November
02.30 China Consumer Price Index for December
15.00 Bank of England spokesman S. Tenreyro Speech
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