Currency Market Analysis

Nov 30, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar fell to 2 ½ year lows and was set for its worst month since July. Broad declines pushed the greenback to three-week lows against rivals from Canada and Switzerland, while it was at or near three-month lows against the euro and sterling. The Aussie and kiwi dollars hovered around two-year tops. The broadly weighted dollar index was poised to shed around 2.5% this month, the most in four months, as it bore the brunt of a banner month for Wall Street with the Dow Jones Industrial Average on track for double-digit appreciation and its best month since 1987. Dimming dollar sentiment have been expectations that the incoming Biden administration would come with fewer impediments to global growth, with the Fed expected to maintain or redouble stimulus to keep a wavering recovery on track.

GBP

Sterling hovered within a fraction of a cent from September highs against the downtrodden greenback. Global optimism spurred by progress toward a Covid-19 vaccine coupled with flickering hopes for a Brexit trade agreement has conspired to push the pound higher. Sterling sentiment this week is expected to hinge on whether the UK and EU can reach a compromise trade pact. 

EUR

The euro climbed to three-month highs as it capitalized on greenback weakness. Broad based dollar weakness allowed the single currency to shrug off weaker than expected German inflation which contracted at an annual rate of 0.3% in November. The disappointing data could foreshadow more weakness when the wider euro zone publishes fresh inflation figures Tuesday. A stronger euro against a backdrop of a weaker European economy cemented expectations for the ECB to deliver bold and potentially euro-weakening stimulus on Dec. 10. 

CAD

Canada’s dollar rose to three-week peaks and to within striking distance of recent October 2018 highs. USD/CAD has shed nearly 3% this month as brightening prospects for global growth once a vaccine is readily available spurred a nearly $10 rally for oil this month to $45. Moreover, mounting signs of a strengthening Chinese economy boded better for commodities currencies. Canada this week issues third quarter growth Tuesday and its November jobs report Friday.


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