Major events of the upcoming week
In the first trading week of 2021, investors focused on political news from the United States. On January 6, an end was put in the next cycle of pre-election confrontation between Republicans and Democrats. In the second round of the Senate elections in Georgia, the Democratic Party won. Congress was able to finally approve the victory of Joe Biden in the elections in the United States, and representatives of the Democratic Party for the coming years took control of the Senate and the House of Representatives.
The protracted fierce confrontation between the two largest political parties in the United States ended with the storming of the Capitol, during which law enforcement agencies detained more than 70 people, and five rioters were shot dead. Order and law have been restored in Washington.
The market exhaled with relief. Most likely, in the near future, investors will again switch their main attention from political news to the economy, which continues to experience serious pressure due to the active spread of the coronavirus pandemic. Many EU countries have been forced to extend quarantine restrictions in order to contain the spread of COVID-19. The epidemiological situation has also worsened in Asian countries, where in recent months isolated cases of the disease have been recorded. Japan, South Korea and China have imposed restrictions on the movement of citizens in certain regions.
In the United States, the epidemiological situation also remains difficult. Despite the start of the vaccination program for the population, the virus continues to actively spread. Some states have tightened quarantine measures. Investors are watching closely how the new virus outbreak will affect the economy.
US – consumer price index data
The dynamics of consumer prices is one of the key indicators that the Fed is guided by when making decisions on adjusting the parameters of monetary policy. But in recent months, the impact of the inflation report on the dollar has dropped significantly. In the spring of 2020, the regulator sharply relaxed monetary policy to support the economy in the face of the coronavirus pandemic. The Fed says that interest rates will be kept low for quite some time until the economic outlook improves.
Even in the event of a strong deviation of the actual inflation data from the forecast, investors' expectations regarding the future Fed policy are unlikely to change. Therefore, the market is likely to react calmly to the publication of the inflation report. Only abnormal deviations of actual values from the forecast, which is extremely unlikely, can cause a strong market reaction.
UK – macroeconomic statistics block
The British pound sterling in the first trading week of 2021 was under pressure due to the difficult epidemiological situation in the country and the uncertainty about the prospects for economic development after Brexit. In the coming months, investors will tighten control over the publication of macroeconomic data from the United Kingdom to assess the impact of the pandemic and Brexit on the economy.
But GDP and manufacturing data for November published on Friday is unlikely to have a strong impact on trading, as it does not take into account the subsequent lockdown and the UK exit from the EU.
US – retail sales report
In December, the U.S. coronavirus pandemic remained challenging. The number of cases grew steadily. Many states have tightened controls on the movement of citizens. Against this background, experts predict a further decline in retail sales and consumer activity. But the rate of decline will obviously slow down compared to November. Sales are expected to decline by 0.3% from -1.1% a month earlier. Stronger data could provide significant support for the dollar, which has been under serious pressure in recent weeks. Strong macroeconomic data from the US may reduce investor expectations regarding the increase in stimulus measures from the White House and the Fed.