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Currency Market Analysis

Nov 24, 2020 | Currency Market Analysis

Global Themes

America’s dollar slipped anew after scratching out a gain the previous day. The euro and sterling rose while rivals from Canada, Australia and New Zealand rose to fresh peaks. Investor optimism brightened after the federal government allowed the transition to President-elect Joe Biden to begin. Market morale also got a boost from reports that Mr. Biden plans to nominate the well-respected and former Fed Chairwoman Janet Yellen as the next Treasury secretary. Ms. Yellen is considered an advocate of more stimulus to help ease the economic damage from the ongoing coronavirus pandemic. Greenback sentiment has soured as several highly effective Covid-19 vaccines have helped to brighten the outlook for U.S. and global growth. While the path of least resistance appears lower for the dollar, bouts of weakness have been curtailed a bit by technical support and the highly uncertain road ahead for growth before widespread distribution of a vaccine.


The euro rebounded from a Monday fall when sellers emerged following its rise to two-week peaks. Better than expected data from Germany also helped at the margin. Germany’s Ifo survey of business confidence moderated for the second month in a row, slipping to 90.7 in November from 92.5 in October, but printed above expectations of a deeper decline to 90.1. Back to back months of weakness, though, won’t allay fears that Europe’s biggest economy contracted in the fourth quarter. 


An uptick in global risk sentiment kept sterling within striking distance of 11-week highs against the greenback. Global markets are cheering vaccine optimism, America’s government transitioning to the incoming Biden administration, and hopes that Janet Yellen will head the Treasury Department and jumpstart stalled fiscal stimulus negotiations. A gauge of U.K. consumer spending fared better than expected, adding traction to the pound’s rise. 


Commodity currencies rolled to fresh highs with the loonie flirting with two-week peaks while rivals from Australia and New Zealand were at or near two-year highs. Markets are basking anew in euphoria related to a potentially potent Covid-19 vaccine and a smoother transition to Team Biden from outgoing President Trump. Oil strengthened more than 1%, pushing prices toward $44. 

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