As a choppy risk climate revamped safe-haven demand for the greenback, the dollar has had a good week against most peers. That said, the pause in the decline in the dollar seen in January has not been followed by a strengthening of the main arguments in favour of a bearish medium-term view. The Fed's reiteration of its "lower for longer" posture leaves the real-rate profile of the USD as highly unsupportive of the currency, and we are inclined to assume that a resumption of a healthy risk rally is likely to occur in the coming months. The retail-trading-induced high volatility in some stocks and the subsequent trading restrictions on the Robinhood online platform have been an unusual driver of risk appetite in the past few days. This definitely remains one thread to follow, which may keep investors jittery for a little longer, signalling that new defensive dollar positions might not yet be unwound.
That said, as the first batch of hard data for 2021 is released, we might potentially see the market's emphasis turn back to more "textbook" fundamentals this week. The January employment report will be the highlight of the week and we expect a reading of +100k, which is slightly above consensus, but is unlikely to create a lot of enthusiasm from the sector.
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