Currency Market Analysis

Nov 23, 2020 | Currency Market Analysis

Global Themes

The greenback skid to fresh lows as markets took comfort from more good news about a potential Covid-19 vaccine. The euro and Swiss franc jumped to two-week peaks while the U.K. pound climbed to September highs. Canada’s dollar strengthened as oil flirted with $43. Emerging markets also appreciated with the Mexican peso rising to March highs. For the third time in as many Mondays, a drug maker is touting a promising coronavirus vaccine, as AstraZeneca said its was up to 90% effective. While encouraging, the vaccine news hasn’t been a cure-all for markets which for now has helped to slow the dollar’s decline. Nevertheless, the greenback sits just above a key floor that if broken would hasten levels last touched in May 2018. Investor confidence continues to wrestle with the expected economic fallout from fresh business restrictions aimed at slowing the rapid spread of the virus. America issues a slew of data on Wednesday ahead of the Thanksgiving holiday.

CAD

Canada’s dollar jumped to the top of the range against its U.S. peer with higher oil suggesting an elevated risk of it testing fresh highs. Oil, one of Canada’s prized commodity exports, jumped more than a percent to around $43. So far the loonie has kept to a confined range as rallies for risky assets have been undercut of late by festering concerns about business restrictions choking off the global recovery.

GBP

Sterling flirted with three-month highs against the U.S. dollar as global markets cheered news of another promising Covid-19 vaccine. The upbeat news on a vaccine – a Monday three-peat – helped to overshadow news that Britain’s composite PMI for November contracted with a print below 50. The pound’s outperformance also reflects hopes for the U.K. and EU to forge a long-term trade agreement by the end of the year.

EUR

The euro rose to two-week peaks against the greenback as optimism over a potential Covid-19 vaccine overshadowed more evidence of a moderating recovery across the continent. Both German and euro zone PMIs slowed in November, news that cemented expectations for the ECB to dial up stimulus next month.


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