US dollar enjoys a corrective bounce (Daily analysis 11.01.2021)

Markets enter the new week with a clear risk-off mode on equities and commodities experiencing a modest sell-off. The US dollar advances for the third day in a row while Bitcoin sinks from all-time highs.

The dollar index reclaims the 90.00 mark. The greenback rises thanks to the higher US yields, but the move is definitely exaggerated by the sell-off scale and pace from the last weeks of 2020. The EUR/USD pair trades around 1.22 and the USD/JPY exchange rate reclaims 104.00.

The pound sterling has recently traded poorly as capital flows remain adverse and the pandemic situation has significantly worsened. The GBP/USD pair trades around the 1.35 at the time of writing, and the pound sterling should continue to underperform the G-10 peers.

This week, market participants will focus on the retail sales data from the United States, which could shed further light on how the economy struggles with the second wave of Covid-19 infections. Last week's data paint a mixed picture with strong ISM readings contrasting with a modest employment loss. Political developments will remain in the limelight. Moreover, on Friday president-elect will call for further fiscal easing (the details should be known on Thursday) and the Democrats mull over efforts to impeach Donald Trump if vice president Pence fails to remove Trump from office.