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Currency Market Analysis

Nov 16, 2020 | Currency Market Analysis

Global Themes

Another shot of optimism boosted Wall Street and oil markets while the greenback was little changed. The U.S. dollar was flat to firmer against the euro and sterling while it outperformed versus the yen and Swiss franc. Commodity currencies strengthened with the loonie and Aussie dollar up at least a third of a percent. Risk currencies are rallying after Moderna said that its experimental Covid-19 vaccine was 94.5% effective. Markets were already in risk-on mode following upbeat data from China and Japan helped to dim in the spotlight on the worrisome rise in coronavirus infections that threaten to knock the global recovery off track. Chinese reported a faster pace of factory growth and consumer spending while Japan’s economy grew at a faster than expected pace of more than 21% in the third quarter.


The loonie jumped, boosted by markets cheering another promising Covid-19 vaccine. A 4% spike in oil lifted prices to around $42. It also helped that Asia-Pacific signed what’s being billed as the world’s largest trading bloc of more than a dozen countries: the Regional Comprehensive Economic Partnership. As a leading commodities exporter, the loonie tends to strengthen in the wake of good news for global trade. After shedding nearly a cent last week, the loonie will look to domestic data this week on inflation Wednesday and retail sales Friday for its cues.


The euro wavered after climbing overnight to one-week highs. The euro has kept to a range as its strength represents a stiff economic headwind on the export-driven bloc and can give the ECB more incentive to significantly boost stimulus next month. Near the top of the range, the euro may be a couple cents away from the central bank’s tolerance of currency appreciation.


Sterling favored its back foot as it was largely grounded in the face of rallying global stocks over vaccine optimism. Pound fragility stems from the uncertain final chapter of Brexit and whether London and Brussels will reach a compromise trade pact before the year-end expiry of a transition phase. Expectations that British data this week may be consistent with tepid economic fundamentals added to the pound’s lackluster start to the week. Inflation Wednesday is expected to remain low and inside of 1% while retail sales Friday are forecast to slow. 

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