Congress formally certified Biden as winning the November election with Harris confirmed as Vice President.
Risk appetite remained firm on Thursday with relief that political conditions in Washington calmed quickly. Wall Street equities posted fresh record highs amid strong liquidity with global equities also posting solid gains and record highs for Asia.
The dollar secured limited gains in a correction from recent sharp losses with higher yields also boosting the US currency to some extent. EUR/USD dipped to below 1.2250 before finding support as underlying US sentiment remained weak.
Sterling was little changed overall as negative BoE rates speculation offset strong global risk appetite. Commodity currencies were hit by a correction, but regained ground amid strong underlying sentiment.
The Euro moved sharply lower in early Europe on Thursday with EUR/USD lows just below 1.2250 as the US dollar secured a technical comeback after recent selling pressure.
The Euro-zone services sentiment index weakened to -17.4 from -17.1 the previous month, although there was an improvement in industrial confidence to -7.2 from -10.1 previously. Earlier, Germany reported an increase in factory orders of 2.3% for November from 3.3% the previous month. Euro-zone consumer prices declined 0.3% in the year to December, unchanged from the previous month and slightly below market expectations of 0.2% while the core rate remained at 0.2%.
US initial jobless claims declined to 787,000 in the latest week from a revised 790,000 the previous week and slightly below consensus forecasts of 800,000. Continuing claims declined to 5.07mn from 5.20mn the previous week and also slightly below market expectations.
The ISM non-manufacturing index strengthened to 57.2 for December from 55.9 previously and confounded expectations of a monthly decline. There was also a slightly faster pace of new orders on the month, but employment declined and order backlogs also declined. Given coronavirus restrictions, the headline data provided significant relief, although companies were cautious over the outlook. Relatively narrow ranges prevailed with further EUR/USD support just below 1.2250.
The Euro was hampered to some extent by concerns over a slow pace of coronavirus vaccine rollouts in the Euro-zone area.
Germany also reported its highest daily coronavirus death toll and EUR/USD traded around 1.2260 with narrow ranges prevailing.
The latest employment report is scheduled for release on Friday with markets braced for a weaker report, although the impact is liable to be limited.
China’s FX reserves increased $38.0bn for December to $3.22trn, maintaining underlying strength in the balance of payments position which will underpin the yuan.
Political developments in Washington continued to dominate the media. After an all-night session, Congress formally certified Biden as winning the November election with Harris confirmed as Vice President. Following overnight violence, there were further calls for President Trump to be removed from office through invoking the 25th amendment, although the overall mood calmed during the day which helped underpin risk appetite.
Higher bond yields were again a significant factor underpinning the US dollar during the day. Fresh gains in equities also had some impact in curbing defensive demand for the Japanese currency. In this environment, USD/JPY strengthened to highs around 103.80 at the European close. Chicago Fed President Evans stated that there could be a tapering of bond purchases late in 2021 or early 2022 if strong progress was made. The dollar held gains as Wall Street indices posted fresh record highs.
China’s central bank continued its efforts to curb substantial capital inflows which limited yuan gains. There was some relief over a more moderate tone from President Trump which underpinned risk appetite. US bond yields continued to move higher and USD/JPY settled just below the 104.00 level in early Europe.
The UK PMI construction-sector index declined marginally to 54.6 for December from 54.7 the previous month and in line with consensus forecasts. There was further strong growth in the house-building sector and new orders continued to increase while employment also increased slightly on the month.
Firm global risk appetite continued to provide an element of protection to Sterling during the day, especially with further gains in the FTSE 100 index. UK equities under-performed substantially last year with pressure for funds to increase their UK weightings this year, especially with a Brexit trade deal in place.
Although there was an easing of new daily coronavirus cases, deaths increased further and there were further concerns over the near-term economic outlook and increased speculation that the Bank of England could introduce negative interest rates, possibly as early as the February meeting. GBP/USD settled below 1.3600 after finding support below 1.3550 while GBP/EUR settled around 1.1050. There was little change on Friday with GBP/USD around 1.3570 as overall volatility declined.
|07:00||German Trade Balance(NOV, 2020)||18.0B||18.2B|
|07:00||German Industrial Production (M/M)(NOV, 2020)||0.70%||3.40%|
|07:45||Consumer Confidence(DEC, 2020)||90|
|07:45||Consumer Spending MM(NOV, 2020)||2.90%||3.70%|
|07:45||Industrial Output MM(NOV, 2020)||-2.70%||1.60%|
|08:30||GBP Halifax HPI (M/M)(DEC, 2020)||1.20%|
|09:00||Unemployment Rate(NOV, 2020)||9.80%|
|10:00||Euro-Zone Unemployment Rate(NOV, 2020)||8.50%||8.40%|
|13:30||USD Average Hourly Earnings (M/M)(DEC, 2020)||0.30%|
|13:30||USD Average Hourly Earnings (Y/Y)(DEC, 2020)||4.40%||4.40%|
|13:30||USD Non-farm Payrolls(M/M)(DEC, 2020)||100K||245K|
|13:30||USD Private Nonfarm Payrolls (DEC, 2020)||100K||344K|
|13:30||United States Unemployment Rate(M/M)(DEC, 2020)||6.70%|
|13:30||CAD Full Employment Change(DEC, 2020)||99.4K|
|13:30||CAD Employment Change (M/M)(DEC, 2020)||-15.0K||62.1K|
|13:30||CAD Unemployment Rate (M/M)(DEC, 2020)||8.60%||8.50%|
|20:00||USD Consumer Credit(NOV, 2020)||7.23B|