The U.S. trade deficit will widen to an all-time high in 2021 as imports of consumer goods surge. The epidemic has dampened service consumption, and spending on goods has expanded. The U.S. Commerce Department's data released on Tuesday showed that the full-year deficit in goods and services widened for the second year in a row, rising 26.9 percent to $859.1 billion. The deficit widened to $80.7 billion in December, slightly below the median forecast of $83 billion among economists polled by Bloomberg. The figures are not adjusted for inflation.

A series of diplomatic moves ahead of the resumption of Iran nuclear talks in the Austrian capital on Tuesday showed that the parties were trying to reach a long-sought deal. Iran and China coordinated strategies for talks in Vienna on Tuesday aimed at reviving the world powers' nuclear deal with Tehran. Meanwhile, Russian President Vladimir Putin said his country's position closely followed France's. Confidence-building gestures by the United States and Iran have sparked renewed optimism that the two sides are just one step away from a deal that could see Iran export oil again by the end of the year in exchange for restrictions on its nuclear program. But disputes remain over when sanctions will be lifted and which centrifuges Iran will be allowed to operate. Oil prices fell this week, snapping a seven-week winning streak, in part due to progress in Iran talks. During the talks, Iran stressed the need for Western countries to take a pragmatic approach to the talks, according to a statement released by the Iranian foreign ministry after a phone call between Iranian Foreign Minister Hossein Amirabdollahian and Chinese Foreign Minister Wang Yi late Monday.

Small businesses in the U.S. raised their prices to a record high in January in response to rising raw material and labor costs. A net 61% of business owners said they raised their average selling price in January, the most since compiling the data in 1986, data from the National Federation of Independent Business (NFIB) showed on Tuesday. Inflation remains the top concern for small businesses, with the highest percentage of respondents mentioning it since 1981. "More small business owners are starting to raise prices in the new year to pass on rising inventory, supply demand and labor costs," NFIB chief economist Bill Dunkelberg said in a statement. "In an effort to attract qualified workers to fill vacancies, the percentage of business owners with pay increases has also reached unprecedented levels. "

The Fed's rate hikes ended up being the dollar's enemy number one, upending Wall Street's consensus this year. While conventional logic suggests rising yields should boost the dollar, traders are now betting that Fed tightening will hamper growth. Demand for U.S. dollar call options has fallen to a nine-month low as the greenback pares gains from the start of the year. That put dollar bulls at Morgan Stanley, Bank of America and Citigroup on the defensive. "The flattening of the yield curve shows that the market is thinking, 'Okay, because of the rate hike now, in the not-too-distant future growth is going to slow again," said Jane Foley, head of foreign exchange strategy at Rabobank in London. Impact on the dollar in the second half of the year." The dollar's movements are often intertwined with the economy. The popular "dollar smile" theory suggests that the dollar strengthens when the U.S. economy outperforms other countries or when safe-haven demand emerges. The dollar climbed during January's stock market rout, but has since pared those gains, failing to take advantage of an acceleration in expectations for Fed rate hikes.

Investors may have overreacted to what they see as the ECB turning hawk, said Francois Villeroy de Galhau, governor of the French central bank, a member of the European Central Bank's Governing Council. European Central Bank President Christine Lagarde's speech last week led traders and economists to a consensus that the ECB is expected to end negative interest rates in 2022. Lagarde stressed on Monday that policy changes would be "gradual", but the market largely fell on deaf ears. "I wouldn't think the ECB would go along with the market's potential timetable because of what has happened in recent days," Villeroy told France's National Assembly finance committee. "I think some of the reactions in recent days may have gone too far."

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