The U.S Dollar Hits Reverse Ahead of the ECB Monetary Policy Decision and Press Conference

Earlier in the Day:

It’s was a relatively busy start to the day on the economic calendar this morning. The Aussie Dollar and the Japanese Yen were in action early this morning.

Later this morning, the Bank of Japan delivers its first monetary policy decision of the year. While the markets expect the BoJ to continue to leave policy unchanged, the latest wave of the pandemic will be a concern.

Vaccination rates will need to materially pick up globally, not just in Japan, to support a sustained economic recovery.

Away from the economic calendar, sentiment towards the U.S economic outlook provided direction early on. Hopes of significant fiscal support drove demand for riskier assets early on.

For the Japanese Yen

The trade surplus widened from ¥366.1bn to ¥751.0bn in December 2020. Economists had forecast a widening to ¥942.8bn.

According to the Ministry of Finance,

• Exports rose by 2.0% in the month of December, while imports slid by 11.6%.
• For the calendar year, 2020, exports slid by 11.1%, with imports tumbling by 13.8% to leave the trade surplus at ¥674.73bn.

By geography,

• Exports to Asia fell by 5.1%, in spite a 2.7% increase of exports to China. Imports from Asia saw a more marked 7.5% decline in the calendar year 2020.
• To the U.S, exports tumbled by 17.3%, with imports from the U.S sliding by 14.0%.
• Exports to Europe slid by 15.1%, driven by sizeable declines to Germany (-14.9%) and the UK (-24.3%). Imports fell by 13.7 from Europe in the calendar year.

The Japanese Yen moved from ¥103.547 to ¥103.572upon release of the figures. At the time of writing, the Japanese Yen was down by 0.01% to ¥103.55 against the U.S Dollar.

For the Aussie Dollar

Employment figures were in focus this morning.

According to the ABS,

• Employment rose by 50k in December, following a 90.0k increase in November, which was in line with forecasts.
• Full employment increased by 37.5k, following an 84.2k jump in November.
• As a result, the unemployment rate slipped from 6.8% to 6.7%, while the participation rate rose from 66.1% to 66.2%.
• Employment finished the year 0.7% below the March level, having fallen 6.7% between March and May.
• The recovery in employment was largely as a result of a more marked recovery in part-time employment, however.

The Aussie Dollar moved from $0.77551 to $0.77516 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.27% to $0.7768.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.31% to $0.7194.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

While there are no stats, the ECB is scheduled to deliver its first monetary policy decision of the year.

With the markets expecting the ECB to stand pat on policy, the ECB press conference will likely be the key driver.

Last week, ECB President Lagarde stood by the ECB’s growth forecasts for this year, in spite of extended lockdown measures.

We can expect plenty of discussion on price stability and the outlook during the presentation and the Q&A.

Away from the economic calendar, COVID-19 vaccine news along with the latest COVID-19 figures will provide direction.

At the time of writing, the EUR was up by 0.16% to $1.2125.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. CBI Industrial Trend Orders are due out later today.

With little else for the markets to consider, expect the stats to influence.

Ultimately, however, COVID-19 news updates will likely remain the key driver near-term.

At the time of writing, the Pound was up by 0.15% to $1.3674.

Across the Pond

It’s a busy day ahead on the economic calendar. Key stats include the weekly jobless claims figures and December’s Philly FED Manufacturing PMI.

Housing sector data for December, including building permits and housing starts are also due out. These will likely have a muted impact on risk sentiment, however.

Away from the economic calendar, President Biden’s first moves as U.S President together with COVID-19 news will also influence.

At the time of writing, the Dollar Spot Index was down by 0.15% to 90.340.

For the Loonie

It’s a quiet day on the economic data front. Economic data is limited to house price figures that will likely have a muted impact on the Loonie.

Chatter from Capitol Hill and COVID-19 news will be the key drivers on the day, with little else for the markets to consider.

At the time of writing, the Loonie was up by 0.13% to C$1.2620 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.