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USD, JPY and gold prices rise as Wall Street kicks off 2021 with a series of key events to be eyed

For the first trading week of 2021, FX traders are on a tight schedule. The anti-risk USD and JPY rose as the market begins in a defensive mood. S&P 500 stocks suffered the largest one-day loss in two months and MSCI World equities benchmark experienced the largest drop since last November. For each day of this week, we will have some key events to be watched:

Tuesday: Georgia Senate Runoff Elections

Composition of the next US Senate will be determined on Tuesday after Georgia’s election. If controlled by Democrats (or a 50-50 tie resolved by the Democratic Vice President-elect Kamala Harris), we would see much more fiscal stimulus and greater pressure on US real yields, which is negative for USD. On the other hand, a Republican Senate will see a much less favor towards financial stimulus.

Wednesday: German Retail Sales and US ADP Payrolls

In the Eurozone, we have Germany’s November retail sales data. Currently the market forecast is quite pessimistic, creating a net short for EUR in the short term. In the US, we will see ADP payroll data releasing, which is often regarded as a prelude to the non-farm payrolls. The December ADP forecast is quite low at 75k, indicating a short for USD but long for the gold price.

Thursday: Eurozone Zew Economic Sentiment Index and US Initial Jobless Claims

The Zew Economic Sentiment Index for December will be released this Thursday. In November, this index was 87.6, dropping 3.5 compared with the prior month and it was the first decline since May 2020. Among all the industries, retail had the hardest hit and manufacturing remained stable. In the US, we will have the weekly Initial Jobless Claims for the week until January 2nd, which will send out the signal for the direction on the non-farm payrolls. Previously, the number of claims surprisingly landed at a historical monthly low. However, considering the rising COVID cases, the market is now keen to watch the next release.

Other events to be watched on Thursday include Eurozone core inflation rate and MXN inflation rate.

Friday: US December Non-Farm Payrolls

Despite the consensus survey from Bloomberg, which calls for over 50k new jobs, other voices in the market have a much more negative view. Last time in November, US has only added 245k new jobs, way less than the forecast at around 460k. Non-farm payroll is one of the most critical signals on the health of US economy and has strong implications for the trend on USD.