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Currency Market Analysis

Oct 20, 2020 | Currency Market Analysis

Global Themes

A subdued greenback notched one-week lows against a broad basket of peers. The euro climbed to one-week highs while rivals from Britain and Canada firmed. Wall Street futures signaled a rebound after the Dow industrials shed 1.4% on Monday. Broader market sentiment remains cautious and fluid, keeping currencies bouncing in a narrow range. The market isn’t holding its breath for Washington to agree on a stimulus deal before today’s deadline for a pact before the presidential election. Moreover, the race for the White House appears a bit tighter than recent polls have suggested which is keeping alive the risk of a contested outcome. Focus remains on Washington over stimulus and U.S. housing data today, a sector that has benefited from historically low mortgage rates. 


The loonie shadowed Wall Street futures and oil markets higher. Sentiment remained fluid, though, amid elevated doubts in Washington agreeing on a stimulus deal before today’s deadline for a pact before the Nov. 3 presidential election. For now, broader markets are carrying the day for the loonie ahead of important snapshots Wednesday on the health of Canada’s recovery. Retail sales are expected to accelerate with a 1.1% rise in August, while inflation is forecast to tick up to a still-low rate of 0.4% annually in September. Down Under, the Aussie and kiwi dollars tumbled, with the former hitting 3-week lows, on rising expectations of imminent reductions in local interest rates.


A resilient euro climbed to one-week highs against the greenback. The euro is benefiting from rising political uncertainty in the U.S. ahead of the presidential election in two weeks. Europe releases important factory surveys Friday that will shed light on the strength of the bloc’s recovery and the durability of the euro’s bounce above the two-week lows it slipped to last week.


Another rally for the pound gave way to renewed weakness. Sterling touched a key top this week only to lose ground amid elevated uncertainty over ongoing Brexit negotiations. Market odds seem to narrowly favor the UK and EU reaching some sort of a trade pact that avoids the parties slapping trade tariffs on goods next year. Despite the noisy day-to-day narrative of Brexit, GBPUSD is broadly flat for the month of October. 

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