FX Week Ahead - China New Yuan Loans, Fed Speeches, US Inflation Rate & Retail Sales, UK GDP

ALL WEEK | FIVE FEDERAL RESERVE POLICYMAKER SPEECHES

The economic calendar during the second week of January will provide some key insights into the US economy, which appears to have backtracked in November and December. Coupled with five speeches from Federal Reserve policymakers, including one from Fed Chair Jerome Powell, it’s likely that the US Dollar sees several instances of heightened event risk over the course of the week. For the Fed speakers, we’re watching to see if their comments further instigate taper tantrum concerns.

Fears of another ‘taper tantrum’ a la 2013 have started to wake up, with long-end US Treasury yields rising (notably, the 10-year yield moving back above 1%). Although Fed policymakers won’t be moving on interest rates in an official capacity, we’ll see if this week’s coming slate of Fed speeches produce more early taper tantrum-like reactions across the curve.

01/13 WEDNESDAY | 13:30 GMT | USD INFLATION RATE (DEC)

The December US inflation report (consumer price index) due on Wednesday is expected to show continued moderation in price pressures, still insignificant enough that the Federal Reserve will remain moored to its current aggressively dovish policy path. According to Bloomberg News, the headline US inflation rate is expected in at +1.3% from +1.2%, and the core US inflation rate is due in at +1.6% unchanged (y/y). Any recent upside pressure may be explained away by the persistently weak US Dollar and rising energy prices through December 2020.

IG CLIENT SENTIMENT INDEX: USD/JPY RATE FORECAST (JANUARY 11, 2021) (CHART 1)

(Click on image to enlarge)

FX Week Ahead - Top 5 Events: China New Yuan Loans, Fed Speeches, US Inflation Rate & Retail Sales, UK GDP

USD/JPY: Retail trader data shows 56.62% of traders are net-long with the ratio of traders long to short at 1.31 to 1. The number of traders net-long is 4.44% higher than yesterday and 15.05% lower from last week, while the number of traders net-short is 7.02% lower than yesterday and 27.50% higher from last week.

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