Despite a choppy week for the markets, all eyes will be on Sunak Rishi’s UK budget and road to recovery on Wednesday.

weekly market watch 11 January 2021

Week starting 01-03-2021


USD

  • As risk sentiment soured into the second half of last week, the USD rose rapidly as it entered the weekend in the green against the majors.
  • US non-farm payrolls are being released this week. Jobs data is expected to show a rise of 140,000 jobs, while unemployment is expected to remain at 6.3%.
  • Purchasing Managers’ Index (PMI) numbers are expected to climb across the board, meaning the services sector is recovering along with the manufacturing sector.
  • Biden’s stimulus bill is on the docket again this week, as the pressure piles up with the minimum wage increase.
  • Risk sentiment is also going to play a critical role for the USD, with a risk-off sentiment benefitting the Dollar.

EUR

  • The Euro locked in some gains last week as it benefitted from risk-off flows despite a mixed bag of data reports.
  • The Italian government will be giving its 2020 budget on Monday, followed by the year’s Gross Domestic Product (GDP) growth. Should the numbers miss forecasts, we can expect the Euro to weaken.
  • On Tuesday, German retail sales are anticipated to fall from December to January, while the unemployment rate is expected to remain at 6%.
  • European PMI numbers are due on Wednesday and Thursday. Any significant misses should impact the Euro. Risk sentiment is likely to have an impact on safe-haven pairs this week.

GBP

  • It was a choppy week for the British Pound as it rose on positive unemployment data, but it fell with a turn in risk sentiment in the second half of the week.
  • The Pound will be hoping to make some gains this week as Rishi Sunak delivers the UK budget and road to recovery on Wednesday.
  • Economic and fiscal forecasts will follow the budget. They are expected to be the biggest drivers for the Pound this week.
  • The housing index, which is due Friday, is expected to rise for February, which should indicate a recovery for the housing sector.

ZAR

  • The South African Rand remains as volatile as ever.
  • Tito Mboweni’s budget last week caused the Rand to strengthen in the short term, but the ZAR quickly weakened into the weekend following the shift in risk appetite.
  • Positive news came late Sunday when President Cyril Ramaphosa eased lockdown restrictions to alert level one.
  • Anti-dollar movements and investor sentiment is likely to have a significant impact on the value of the Rand this week in the absence of major data reports.

AUD

  • The Australian Dollar lost top spot last week as risk assets fell across the markets due to rising bond yields.
  • The most important catalyst for the AUD this week will be the interest rate decision on Tuesday. The Reserve Bank of Australia (RBA) is not expected to make any changes, but they should be tipping on the rate of recovery of the Aussie economy.
  • On Wednesday, the GDP data is due during the Asian session.
  • With the RBA chart pack also due, it is expected to have a significant impact on AUD pairs.
  • On Thursday, January’s balance of trade figures, imports, exports and retail sales figures are due. Upon release, the AUD pairs might be impacted.

NZD

  • The Kiwi Dollar had a bullish reaction to the adjustment of the Reserve Bank of New Zealand’s (RBNZ) mandate, but it ended up in the red along with riskier assets due to a swing to a more risk-off sentiment.
  • A relatively quiet week for the Kiwi Dollar means that it will be driven by risk flows and counter-currency movements.
  • Import and export prices are due on Tuesday, but we do not expect these to have a significant impact on the rates.
  • A frustrated Prime Minister Jacinda Ardern has announced a 7-day lockdown in Auckland after rule-breakers led to a level-3 lockdown.

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