Dollar Weakens After Biden Inauguration; ECB Up Next

Thursday,   21-Jan-2021   02:11 PM (IST)

The dollar started the European session on the back foot Thursday, with riskier currencies in demand amid increased hopes for hefty U.S. stimulus measures as President Joe Biden moved into the White House. At 3:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 90.297, declining for a third day since touching a near one-month high on Monday. USD/JPY was down 0.1% at 103.41, after the Bank of Japan kept monetary policy unchanged earlier Thursday while revising up its economic forecast for next fiscal year. GBP/USD climbed 0.3% to 1.3695, while the risk-sensitive AUD/USD was up 0.2% at 0.7761, after Australia reported another strong rise in employment in December. Biden was sworn in as the 46th president of the United States on Wednesday, and traders are seeing the change in administration as increasing the chances of increased stimulus given the incoming president has already proposed a $1.9 trillion Covid-19 relief bill. The dollar started the year on a firmer footing as U.S. Treasury yields rose on the back of expected greater borrowing to fund additional stimulus. However, this tone has changed with Federal Reserve members keen to point out that policy will remain ultra-loose for years to come, something that will perpetuate the U.S.'s large twin deficits. Later Thursday, the weekly jobless claims numbers are scheduled to be released. These are expected to show almost one million new people claiming benefits, while continuing claims are seen at 5.4 million. These figures, combined with a disappointing jobs report for December, could help convince lawmakers to pass Biden’s stimulus proposal. Housing starts and building permits numbers for December are also due. Elsewhere, the European Central Bank holds its latest rate-setting meeting later Thursday, although changes to its monetary policy are unlikely given it delivered a hefty easing package only in December.