Biden starts his term, pushing down USD given upcoming inflation risks, putting GBP and EUR at a stronger position against USD
• GBPUSD and EURUSD surged as Biden begins the work
• Canadian Governor expressed concern over CAD strength
• New Zealand inflation data further tempers RBNZ rate cut bets, pushing the currency to its upside
Joe Biden has finally completed the inauguration and officially kicked off his term as the 46th President of the United States. The session came as a relief as no chaotic movements or shocks or any occurrences of civil unrest has been seen. Optimism for the huge stimulus package is now boosting risk sentiment in markets, which effectively pushes down USD. Investors became more willing to take risks and began selling USD at least for now. This downside has raised exchange rates on GBP and EUR against USD. Pound investors are even more hopeful as the UK’s COVID vaccine rollout hits experts’ projections of 350,000 doses per day. Investors are feeling optimistic that lockdown restrictions will be eased in mid-February.
In Canada, Governor Tiff Macklem expressed the concern that, “in this situation where we’ve seen this broad-based US dollar deprecation that doesn’t reflect some positive development in Canada that the exchange rate is absorbing…the exchange rate is starting to create a material headwind for the Canadian economy.” Furthermore, recent Canadian Dollar appreciation, according to the concern, has created some difficulties for the exports from Canada. Unfortunately, for BoC, there is limited measures that could be done to prevent CAD from appreciating against USD, especially also considering USD’s downward trend.
In New Zealand, economic data are pushing the Kiwi even higher after quarterly inflation beats expectations. Q4 inflation rose 1.4% YoY, among the latest signs that the nation’s economy is undergoing a robust recovery following the pandemic. Kiwi rose mostly against its major peers as bets for further easing from the RBNZ have been tempered. According to the New Zealand government, transportation, recreation and housing have largely contributed to the Q4 inflation. Some analysts have adjusted the forecast on the official cash rate (OCR) to be kept at 0.25%.