It was a choppy week for the Greenback, but overall, it was able to finish as a net winner as risk aversion sentiment remains elevated on the COVID resurgence and weakening economic updates.
United States Headlines and Economic data
Fed’s Bostic sees possible interest rate hike as soon as the second half of next year – “The estimate is well out of consensus for the Fed, whose policymakers estimated in December that no hikes would happen through 2023.”
Fed’s Kaplan hopes to begin QE weaning this year – “‘later this year, my own view is, we should at least be having an earnest discussion about when it’s appropriate to taper’ the Fed’s asset purchase program.”
Fed’s Barkin sees strong second half after ‘bumpy’ few months – “I do think you’re looking at a second half that is going to be very strong and the question I think is how do we get through where we are today to that second half,” Barkin, who votes on monetary policy this year, told CNBC in an interview Monday. “While it might be bumpy, I think there are backstops here, and in particular, fiscal would be a backstop, I think elevated savings are a backstop,” he said.
U.S. Small-Business Optimism Falls Sharply in December — NFIB – “The NFIB Small Business Optimism Index came in at 95.9 in December, 5.5 percentage points less than in November. ”
U.S. Job openings declined by less than forecast in November – “The number of available positions eased to 6.53 million from a revised 6.63 million in October, according to the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, released Tuesday.”
Mortgage applications to purchase a home rose 8% for the week and were 10% higher than one year ago. – “The average contract interest rate for 30-year fixed-rate mortgages increased to about 2.88% from 2.86% last week.”
U.S. consumer price index increased 0.4% m/m in December after gaining 0.2% in November. – “We are likely to see a near-term spike in inflation on base effects of a reopening economy in 2021 versus a calamitous period in 2020, but that will fade through the second half of 2021,” said James Knightley, chief international economist at ING in New York.
Fed’s Bullard says all signs point to inflation rising – “The money supply has “exploded,” fiscal deficits are “off the charts” and a hot economy may either already be here or “just around the corner,” Bullard said in an interview at the Reuters Next conference.”
The unemployment rate is above 20% for the lowest-paid workers, Fed’s Brainard says – “The damage from COVID-19 is concentrated among already challenged groups,” Brainard said in a speech Wednesday. “The K-shaped recovery remains highly uneven, with certain sectors and groups experiencing substantial hardship.”
Fed’s Beige Book Shows Modest U.S. Recovery as Job Growth Slows – “Although the prospect of Covid-19 vaccines has bolstered business optimism for 2021 growth, this has been tempered by concern over the recent virus resurgence and the implications for near-term business conditions,” the Fed said in the survey released Wednesday in Washington.
U.S. weekly jobless claims total 965,000, vs 800,000 estimate – The total receiving benefits declined to 18.4 million but remained well above pre-pandemic levels.
U.S. Consumer comfort drops to six-month low on finances concern – “The Bloomberg Consumer Comfort Index fell by 1.2 points to 43.2 points, data released Thursday showed. The eighth-straight decline left the measure down 6.6 points since mid-November, the largest setback since the pandemic-related shutdowns.”
“If inflation were to move up in ways that are unwelcome, we have the tools for that, and we will use them,” he said. “No one should doubt that.”
“Despite those challenges, Powell said the economy faces a bright future in part because of the lack of contagion that happened during the financial crisis in 2008. There has been some concern expressed over the continuous surge in corporate debt as well as stretched stock market valuations, but the Fed chair said he’s not concerned about those issues.”
U.S. retail sales fall 0.7% in December – November’s number was revised lower to -1.4% vs. -1.1%. “Economists polled by Reuters had forecast retail sales unchanged in December.”
U.S. producer price index for final demand increased 0.3% last month after nudging up 0.1% in November, the Labor Department said. – “A 1.1% increase in the cost of goods accounted for last month’s rise in the PPI. Prices for services dipped 0.1%.”
U.S. consumer sentiment slips but shows massive partisan divide – “The University of Michigan’s consumer sentiment index dropped to 79.2 early this month from a final reading of 80.7 in December. Economists polled by Reuters had forecast the index would be little changed at 80.”
The Empire State Manufacturing Survey’s general business conditions index decreased to 3.5 in January from 4.9 in December. – “The reading misses expectations from economists polled by The Wall Street Journal, who had expected the indicator to increase to 6.0.”