USD

The U.S dollar, gauged by the dollar index, reached a six-week high on Monday gaining ground mainly against the Swiss franc (+0.72%), Euro (+0.64%), and Canadian dollar (+0.62%) amid views that the United States has an advantage in growing its economy due to an effective vaccination program and a large pandemic relief package. Thus, the Dollar index added 0.25% on the day. Looking ahead, the latest Redbook retail sales report will help to provide insight on how the U.S retail sector is performing while Federal Reserve members Williams, Kaplan, and Mester will speak throughout the evening. On the earnings front, Amazon and Google will report their results over the day.

EUR

Investors and traders ignored modest improvements in the Eurozone Manufacturing Purchasing Managers Index and employment, preferring to concentrate on bearish fundamentals, such as vaccine supply, Italian politics, and weaker Germany retail sales data. Thus, the EUR slid 0.64% against the U.S dollar on Monday. The euro weakened after Germany reported that retail sales plunged by an unexpected 9.6% in December after tighter lockdowns last year to curb the spread of Covid-19 choked consumer spending. Italian politics is also negative as politicians have sought to find enough common ground to form another coalition government and avoid an election. Looking ahead, the first estimate of fourth-quarter eurozone GDP highlights today’s relatively quiet economic calendar while the fallout from European Union's U-turn over vaccine export controls is set to continue.

GBP

The Pound suffered from general U.S dollar demand, which contributed to extending losses for the GBP (-0.3%), on Monday. However, losses were stanched by better than expected January Manufacturing PMI, which came at 54.1 compared to previous estimates of 52.9. Nevertheless, the latest reading was the lowest in three months as producers faced weaker inflows of new export work and temporary supply-chain disruptions caused by Covid-19 restrictions and transport delays (especially at ports) following the end of the Brexit transition period. Elsewhere, while the pace of vaccinations and general pandemic news flow will remain in focus, the Nationwide Housing Price Index release is due.

JPY

The Japanese yen slid 0.23% against the greenback on Monday for the fourth trading session in a row. The overall picture is that the JPY has lost a significant amount of territory against the USD in recent weeks, after climbing to its strongest levels in 10 months at the start of 2021. This USD’s rally against the JPY seems to be driven by the notable turn higher in U.S Treasury yields, which have been boosted by rising inflation expectations, the prospect of additional fiscal stimulus, and positive vaccine progress. Later today, the Services PMI figures for January will be released. Also, further dollar demand should see the pair make further gains, pushing on from the 10-week highs that spot reached yesterday.

CAD

The Loonie weakened 0.62% against its U.S counterpart on Monday, with the CAD ignoring the oil price surge and the latest PMI figure. January PMI data pointed to a solid expansion in overall operating conditions in the Canadian manufacturing sector. Both output and new order volumes rose for a seventh successive month and firms continued to increase their purchasing activity. Nonetheless, yesterday, the market’s broad appetite was mixed, which led the USD to outperform among the G10 currencies (a sign of risk aversion). Today, in the absence of domestic headlines and ahead of the OPEC+ meeting, the CAD should trade as a function of U.S dollar flows.

MXN

The Peso jumped as much as 0.8% against the U.S dollar on Monday amid a choppy trading session. The MXN’s appreciation was in tandem with a rise in silver prices, where the metal rallied by nearly 9% after retail investors started to buy the commodity. Silver has become the new focus in a broader retail trading trend sparked by social media forums. A rise in oil prices also supported the Mexican peso, where West Texas Intermediate crept up more than 3%. Today, Markit PMI will release their January report for the Mexican manufacturing sector.

CNY

The Chinese yuan depreciated 0.65% against the USD on Monday as the PMI released yesterday was worse-than-expected. The Caixin Manufacturing Index showed a drop from 53.0 in December to 51.5 in January (vs. 52.6 expected). It was the weakest reading since August. Economists explained that the drop was due to a wave of Covid-19 infections ahead of the Lunar New Year holiday next week. Moreover, the USD/CNY pair rose after China’s Central Bank added 100 billion CNY into the system, pushing down the overnight repo rate and providing liquidity to the FX market.

BRL

The Brazilian real rose 0.54% against the greenback on Monday after the PMI report showed the health of the Brazilian manufacturing industry improved further in January. However, the last reading also commented that the key worry is a notable slowdown in the growth of new orders, a key leading indicator of future hiring and production. Today, investors will focus on the result of congressional elections and trucker's strike developments. Both candidates supported by Brazil’s President Jair Bolsonaro for speakers of the Senate and the Chamber of Deputies emerged victorious in a secret election held Monday night. Meanwhile, truckers began their first day of a planned strike against rising fuel prices that raised fears of a repeat of a 2018 protest that disrupted food and fuel supplies across Brazil.