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Currency Market Analysis

Nov 13, 2020 | Currency Market Analysis

Global Themes

The greenback was mildly subdued Friday but poised to finish the week ahead of most rivals. The dollar edged down against the euro, yen and sterling but was sideways against the Canadian dollar. The market remains pitted in a tug of war over vaccine optimism and pessimism about the sharp surge on coronavirus cases. The latter threatens to undermine the nascent recovery from the pandemic and continues to hold the upper hand. The buck outperformed this week as Treasury yields climbed, a sign that it could soon be reunited with a critical source of support. Medicine making significant strides toward a vaccine would bode better for longer run growth prospects, a scenario that could put upward pressure on yields and bolster the dollar’s appeal. Reports today are forecast to show upticks in wholesale inflation and consumer sentiment.


The loonie’s two-year high was nowhere in sight with the Canadian currency on track to underperform the greenback this week. Risk appetite wavered with Wall Street up but oil markets down. The price of crude, a key Canadian export, slipped nearly 2% but kept above $40. The loonie continues to wax and wane in virus-driven trade, a sign that worries over surging Covid cases hold the upper hand over optimism about a vaccine.


Sterling rose Friday, boosted by the latest Brexit developments. But for the week, so-called cable was little changed. The pound rose on hopes of a compromise Brexit deal between the U.K. and EU, following news that Britain’s chief Brexit architecture, Dominic Cummings, would leave after the transition period ends. The Brexit debate remains as fluid as ever with the clock steadily ticking down to year-end when the transition period expires.


The euro inched higher Friday against the dollar, but was on track for a losing week, as a rise in U.S. Treasury yields robbed the single currency of two-month peaks. The euro has settled into something of a neutral zone against the greenback, considering its range since July. Upside for the euro has been undercut by expectations for the ECB to deliver another dose of strong stimulus next month.

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