The U.S. dollar had a rough one to start the new year.
Traders were mixed as they tried to balance unprecedented political developments and terrible job numbers against positive business sentiment updates.
United States Headlines and Economic data
Operating conditions in the U.S. improve at fastest pace since September 2014 – “The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) posted 57.1 in December, up from 56.7 in November, to signal the steepest improvement in the health of the U.S. manufacturing sector for over six years. The headline figure was also up from the earlier released ‘flash’ reading of 56.5.”
Fed’s Bostic says bond-buying ‘recalibration’ could happen in 2021 “he felt the country could be nearing the moment when those “post-vaccine” dynamics start to take shape, and warrant debate about when to scale back the aggressive steps taken in March to nurse the economy through its worst downturn in a century.”
Private payrolls post first drop since April, declining by 123,000 in December vs. the Dow Jones estimate for a gain of 60,000.
“Leisure and hospitality suffered the biggest job losses, with most of the cuts coming from large businesses.”
“Companies laid off a net 19.4 million workers in April and have recovered 9.9 million since, according to ADP estimates that sometimes have differed widely from the official Labor Department nonfarm monthly payrolls tally.”
Pro-Trump protesters storm U.S. Capitol to block certification of Biden’s victory – This tragic event for the U.S. sparked short-term risk aversion behavior, boosting the Greenback temporarily into the Thursday Asia session.
Fed’s Harker says he expects growth to slow before rebounding later this year – “The Federal Reserve may not pare back its bond purchases until the end of this year at the earliest, Philadelphia Federal Reserve Bank President Patrick Harker said on Thursday.”
Georgia delivers Senate to Democrats with Warnock, Ossoff wins – this solidifies the Democrats control of the government, and significantly raises the odds of much more stimulus coming for the U.S. economy. The fade in the Greenback’s rally during Asia and European session seems to correlate with this news as risk sentiment picked up in the U.S. equity markets, likely with the help of very positive business services sentiment updates (ISM Services PMI rises to 57.2 in December vs. 55.9 in November)
Nonfarm payrolls fell by 140,000 in December against the consensus estimate for a 50,000 gain – The release of this surprise number correlates with a turn higher in the U.S. dollar during the U.S. trading session. The risk-on sentiment was also hurt during the U.S. session after news of a potential hurdle to stimulus checks hit the wires (Democratic Sen. Manchin casts doubts on $2,000 direct payments, jeopardizing passage)