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Currency Market Analysis

Oct 28, 2020 | Currency Market Analysis

Global Themes

Safe havens dominated as virus worries spurred a global market rout. The U.S. dollar jumped more than 0.5% against the euro, sterling and Canadian dollar. But the yen leapfrogged the dollar, rising to five-week highs. Markets remain on edge amid a trio of risks related to surging Covid cases, protracted stimulus negotiations in Washington, and America’s high stakes presidential election next week. The euro slid more than 0.5% as Europe stepped up restrictions on economic activity to help stem the surge in Covid cases. Renewed restrictions could choke off a nascent recovery and heighten pressure on the ECB, which meets tomorrow, to deliver more monetary stimulus by year-end. The loonie flirted with two-week lows as markets tumbled and oil, down more than 4%, fell below $38. The Bank of Canada issues a policy decision and fresh economic forecasts today. While mostly stronger, there limits to greenback strength amid elevated uncertainty ahead of the big vote on Nov. 3.


The U.K. pound skid to one-week lows against the greenback amid a classic flight to safety. Market anxiety is on the rise as Covid cases show few signs of peaking anytime soon and the anything but certain outlook for stimulus and America’s election next week. Sterling broke below a key threshold that has intermittently served as either support and resistance. The pound was already on a precarious footing amid Brexit uncertainty and the fragile shape of the U.K. economy.


Canada’s dollar sank to three-week lows as a global market rout shaved more than 4% off the price of oil which slipped below $38. The Bank of Canada today starting at 10 a.m. ET will issue a policy decision along with fresh forecasts for the economy. The loonie would be at risk of accelerated losses if the BOC should emphasize economic uncertainty over recent signs of recovery like unemployment returning to the singe digits (9%) in September.


The euro fell to week-plus lows against the greenback as Europe readied more restrictions in a bid to slow a surge in Covid cases. Renewed lockdowns threaten to choke off the bloc’s nascent recovery. The ECB which is expected to hold fire on stronger stimulus Thursday is likely to sound sufficiently concerned and dovish that it raises the curtain to bolder stimulus by December. After the ECB, big ticket data loom from Europe Friday, numbers like third quarter growth and ECB-critical indicators like euro zone inflation and unemployment.

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