Currency Market Analysis

Nov 20, 2020 | Currency Market Analysis

Global Themes

Currency markets were mostly muted Friday with the greenback generally sideways, though on pace for a weekly decline. The dollar alternated between small gains and losses versus the euro, yen and sterling. Higher oil around $42 boosted the Canadian dollar head of important data today on the consumer. The dollar continues to favor its back foot as investors look ahead to the eventual deployment of a potentially potent vaccine for the deadly coronavirus. Currency traders are more preoccupied with the present where they see the wait for a vaccine continuing to do damage to the recovery. Consequently, expectations for the Fed to resort to stronger stimulus measures as soon as next month have increased dollar vulnerabilities. Still, downside for the buck has proven somewhat limited due to uncertainty over vaccine availability and low expectations for Washington to deliver stimulus before Joe Biden ascends to the presidency in two months.

GBP

Sterling was mostly grounded Friday as subdued risk sentiment largely overshadowed news of surprisingly robust U.K. consumer spending. British retail sales slowed far less than expected, rising 1.2% in October after a 1.4% increase in September. Forecasts had called for spending to stall last month. The pound struggled for a clear steer as another week came and went without tangible progress toward an elusive Brexit trade pact. About 40 days remain for the year and thus the transition period for the U.K.-EU.

CAD

Canada’s dollar kept in close range of one-week highs as oil rose and data showed buoyant consumer spending. Canadian retail sales topped forecasts with a 1.1% increase in September which quashed forecasts of a modest 0.2% gain. The data came on the heels of resilient inflation with a key core measure edging up to 1.6% and closer to the Bank of Canada’s 2% goal. Still, this week’s encouraging data isn’t likely to alter expectations for the BOC to maintain crisis low interest rates for years to come.

EUR

Europe’s single currency was poised to cross the week’s finish line ahead of the greenback, a sign of investor optimism over the eventual distribution of a Covid-crushing vaccine. The coming week looms large for the bloc’s economic wellbeing with important PMI surveys that will shed light on the pace of economic moderation. Weak prints would cement expectations for the ECB redouble euro-negative monetary stimulus next month.


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