The new strain of COVID found in South Africa could disrupt plans by governments and central banks to rebuild economies. Financial markets are starting to price in possible new social and travel restrictions in asset prices and it is unlikely that there will be certainty about possible threats of the new strain in the next week. Consequently, sellers will continue to control the market situation and defensive assets will likely continue to rise next week.
Fed Chairman Jerome Powell will speak on Monday and Tuesday. Markets will closely monitor whether the head of the Fed speaks about the risks of the pandemic resurgence. If so, it should heighten investor attention to news related to the new strain.
On Tuesday and Wednesday, attention should be paid to the PMI data for China in the manufacturing and services sectors. The state of affairs in Asia's largest economy will determine optimism about how long the expansion of the world economy, which is based on the rise of the Chinese economy, can last.
On Wednesday and Friday, data on the US labor market will appear be released—the ADP and Non-Farm Payrolls. Good rates of employment growth are likely to ensure an acceleration in the pace of reducing asset purchases by the Fed, which was mentioned in the minutes of the Fed meeting in November.
In this case, the dollar may open its second wind and its growth will continue. Among the large Central Banks, only the Fed is actively curtailing stimulus, which leads to a widening of the difference in interest rates between the United States and other countries.