Welcome to the first relevant trading week of the new year. Not that the previous week the markets were closed, but many market participants have taken time off and thus the market moves tend to be tricky.
Think of the EURUSD pair. It opened the new year with a gap higher and was literally bought on every single dip. However, by the end of the week, it fell to where it started, once again proving that the market was very thin and liquidity as well.
This week is different. Both Powell, the Chair of the Federal Reserve of the United States, and Lagarde, the President of the European Central Bank, are scheduled to speak this week, so the EUR and USD pairs’ volatility will be affected.
U.S. CPI and Retail Sales – Key Economic Data This Week
The price action this week centers around the U.S. dollar. The greenback started the year just like it ended the previous one – on a bearish trend. However, the recent price action seen in some assets, particularly in gold and Bitcoin, suggests the trend may change. For example, Bitcoin dropped almost 20% after it reached $40k while gold traded lower to end the previous week.
On Wednesday, the CPI (Consumer Price Index) has the potential to move markets. The Core CPI, the one that does not include volatile energy prices, is expected to remain flat at 0.2%, while the headline CPI is expected to increase from 0.2% to 0.4%. Any deviations from the projected values should trigger some movement in the greenback.
Retail Sales on Friday will end the trading week. The Core Retail Sales declined in the previous month, and this week’s release is projected at -0.1%. We may see some upside surprises here considering that the U.S. rolls out new stimulus for households.
Besides the economic data, any news regarding the vaccination efforts, ongoing throughout the world, has the potential to move markets too. Critics argue that governments did not prepare well enough to administer the vaccines and many countries did not use the vaccines already received. As it turns out, the population is willing to take the jab, as vaccination seems to be the only way to win the fight against the virus.
All in all, expect a volatile week as the positioning for the year ahead should dominate the price action.