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US Politics
American politics is set to dominate the first full trading week of 2021, as the January 5th Georgia run-off is expected to have profound implications for the United States over the next four-years. If the Democrat party win in Georgia, they will then control the US Senate.
The market reaction is likely to be one that we have seen time and time again 2020, where bye traders sell the US dollar, buy tech related stocks, gold, and indeed Bitcoin. This is because traders and investors will be anticipating large amount of government spending and looser fiscal spending from the Democrat party.
Should we see the Republicans winning the Georgia run-off then the US dollar index may see some reprieve before it ultimately continues its downtrend for the rest of the year. Traders also have the planned protests outside the White House on January 6th, in which President Trump has recently confirmed that he will be speaking at.
Traders then have the United States Presidential inauguration to watch out on January 20th. It still very much remains to be seen if it will be a smooth transition across from the Trump to the Biden administration.
All these upcoming events could cause some early trepidation amongst traders and investors before they start to enter the market in 2021, and deploy capital into existing, and potentially lucrative new market trends.
Source by ActivTrader.
Next week we also have some big data events to watch out for on the economic calendar, including the December non-farm payrolls job report, ISM manufacturing report, and the Federal Open Market Committee Meeting Minutes from the December Federal Reserve policy meeting.
The US job situation is going to be of particular interest to financial market participants next week. Most economists are forecasting that only 100,000 new jobs were created during the month of December.
Anything worse than 100,000 is likely to spook the markets, as traders start to factor in the ongoing impacts of COVID-19 on an already stressed US economy. Perhaps the biggest test for the American employment situation will be under the first few months of the Biden administration.
Source by ActivTrader.
Analysts have notably mentioned that the Biden administration is likely to impose harsher lockdowns than the Trump administration. If this is the case, then US employment could become a hot topic in 2021.
US stocks may not take the news of rising unemployment so well, so the S&P 500, Nasdaq, and Dow Jones Industrial Average will be major bellwethers of market sentiment during the first few months of 2020.
Brexit
Moving across the pond, Brexit is set to commence on January 31st, marking the start of the United Kingdom’s departure from the European Union. Traders and investors will be closely watching the transition, and exactly how the UK and EU economies fare during the new arrangement.
Relations between the United Kingdom and the EU will also be closely observed. The GBPUSD and the EURGBP pairs could become extremely lively during the month of January. The traditionally slow-moving EURGBP pair is certainly worth watching.
One of the major unknowns for financial markets in 2020 is the potential for the United Kingdom to strike a trade deal with the United States. This has become more difficult since the Biden administration have more apprehension towards a trade deal with the UK than the Trump administration.
Source by ActivTrader.
Most economists are noting that due to the complexity of the deal, a UK and US trade deal is not likely until 2023. However, relations between the United Kingdom and the United States under the new Biden administration will also be scrutinized in 2021. The British pound is not likely to take the news of the “special relationship” between the UK and the United States become fragmented in 2021 very well.
In terms of exports from the United Kingdom, the United States is its largest trading partner. This further underscore the importance of a trade deal, or indeed the perception of a coming trade deal. Additionally, FTSE 100 companies that rely heavily on US exports are also going to be very sensitive to trade news between the two countries.
