The new trading week starts with a weaker U.S. dollar and investors uncertain about inflationary pressures being temporary. New lockdowns are being imposed all around Europe while oil is down.
U.S. Dollar
The U.S. dollar fell on Monday morning in Asia. It remained lower than its longer-than-a-year high. Investors are now watching closely for the next economic data that could indicate the status of the U.S. economic recovery from Covid-19.
The U.S. consumer price index increased at its fastest yearly pace since 1990 and boosted the national currency. The dollar could have also been boosted by the Euro that was down as the European Central Bank (ECB) is not likely to change its dovish attitude. Investors are uncertain about the Fed’s stance that inflationary pressures will be temporary. The Fed is estimating to have its first rate increase by July 2021 with a possible second raise by November 2022.
Oil
Crude oil fell on Monday. The drop could be attributed to the possibility of an increase in the U.S. supply and the U.S. dollar strengthening. Biden could authorize the increase of oil output from the U.S. Strategic Petroleum Reserve to lower prices. This would come as a reaction to its request to the OPEC+ for an output increase that was unmet.
Gold
The price of gold dropped on Monday morning in Asia and fell from its multi-month high during the previous session.
Inflation in the U.S.
Investors are keeping a close eye on inflationary pressure. Federal Reserve Bank of Minneapolis President Neel Kashkari said that he expects higher inflation in the next few months, but the Fed should not react as it is likely that the increase in prices is temporary.
Janet Yellen, U.S Treasury Secretary said that getting the coronavirus under control in the U.S. will be a key factor to easing inflationary pressures.
Inflation in Europe
Inflation could go down at a slower pace than expected in the Eurozone. This could be due to continuous supply chain bottlenecks. In the meantime, two European Central Bank policymakers said on Friday that the central bank should not withdraw stimulus too quickly.
The Bank of England is going to be the first major bank to raise interest rates. It is not yet known when the increase is going to take place, but it is estimated that it could be in December 2021 or during the beginning of 2022.
Covid-19 Fresh Lockdowns
Concerns about increased COVID-19 cases have re-emerged. Austria is putting millions of unvaccinated people under lockdown starting today, Monday. The Netherlands announced last week that it will be imposing a partial lockdown while Germany will hold a meeting to discuss further preventive measures.
China
China’s industrial output and retail sales went higher quicker than expected despite attempts to control coronavirus outbreaks in the nation.
What to Watch this Week:
Monday
Empire Manufacturing
ECB President’s Speech
Tuesday
Europe Gross Domestic Product
US. Retail Sales
U.S. Import/Export Prices
U.S. Industrial Production
Wednesday
U.S. Consumer Price Index
Thursday
U.S. jobless claims
Friday
ECB’s President speech