IFX Market Report: Friday 8th January 2021

Despite the obscene events at Capitol Hill yesterday, the U.S. Dollar has clawed back some of the losses it has made in recent weeks. The US Dollar Index (DXY) was able to extend its weekly recovery today, reclaiming the key barrier at 90.00. Today was the third consecutive trading session of upside for the DXY, but a disappointing December Non-Farm Payrolls could cause the Dollar to halt its recovery.

GBPUSD lost momentum yesterday – starting the day at 1.3600, the pair depreciated over the session and closed at 1.3549. While the rate has improved this morning, the pair has been unable to test the 1.36 handle.

Although GBPEUR saw some increased price action in Thursday’s session, the pair closed only 6 pips below where it opened. The pair started the day at 1.1053 and finished at 1.1049.

As for EURUSD, it would appear that its recent run of good form is coming to a swift end. The pair made a loss in yesterday’s session, opening at 1.2304 and closing at 1.2264. FX Analysts at the United Overseas Bank in Singapore believe EURUSD has now “moved into a consolidation phase” after making advances in recent weeks and is expected to trade “sideways” in the near-term.

Amidst all the commotion in Washington DC, Congress certified the results of Novembers election yesterday morning, confirming President-elect Joe Biden had won by 306 Electoral College votes to Trump’s 232. In a statement posted on Twitter by White House spokesman Dan Scavino, Trump states that “even through I totally disagree with the outcome of the election, and the facts bear me out, nevertheless there will be an orderly transition on January 20th”.

With the Democrats having secured the control of the House, Senate and Presidency, the markets have shown a positive reaction to the prospect of a unified government. As the Democrat victory almost ensures the government will inject more stimulus into the US economy, boosting the economic outlook. A direct result has been longer-dated bonds are higher – with the benchmark 10-year advancing past 1% this week for the first time since March 2020. While Dollar weakness seems to have slowed, a less than favourable Jobs Report this afternoon could cause the Greenback to depreciate again.

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