Dollar retreats on Trump’s inauguration day

The US Dollar remains on the back foot to start the week as investors gear up for Donald Trump’s second inauguration on Monday. Meanwhile, stock and bond markets in the US are closed in observance of the Martin Luther King Jr. Day holiday.

After closing in positive territory on Friday, the USD Index turns south in the European morning on Monday and trades in negative territory at around 109.00.

Trump is expected to announce severe restrictions on immigration on his first day in office. More importantly, investors will pay close attention to any comments on his tariff policy and its potential impact on markets and the inflation outlook.

During Asian trading hours, the People’s Bank of China (PBoC), China’s central bank, announced that it left the one-year and five-year Loan Prime Rates unchanged at 3.10% and 3.60%, respectively. This decision came in line with the market expectation.

The EURUSD currency pair closed the previous week marginally higher. Supported by the broad-based USD weakness, it trades in positive territory above 1.0300 to begin the European session. Later in the session, Eurostat will publish Construction Output data for November.

After suffering large losses to begin the year, GBBUSD failed to gather recovery momentum and closed in the red for the third consecutive week. The pair gains traction early Monday and trades above 1.2200.

USDJPY registered strong gains on Friday, but still lost nearly 1% for the week. The pair stays in a consolidation phase slightly above 156.00 in the European morning.

Despite a bearish start to the previous week, Gold extended its rebound and posted modest gains. XAUUSD stays relatively quiet on Monday, but holds comfortably above $2,700.

(Source: OANDA)