ECB and Brexit Put the EUR and the Pound in Focus

Daily Update – 26th November 2020

Yesterday's Focus

• U.S. Core Durable Goods Orders, Initial Jobless Claims, Gross Domestic Product, Federal Open Market Committee (FOMC) Meeting Minutes

Yesterday's Explained

The dollar continued to weaken on Wednesday, with riskier currencies more in vogue as investors look to the new administration in the U.S. for additional stimulus amid solid progress towards Covid-19 vaccines. The Labor Department's report showed initial claims for state unemployment benefits last week increased from the prior week. With the next fiscal stimulus package now expected only after President-elect Joe Biden is sworn in on Jan. 20, momentum in the labor market is expected to remain slow. Data also showed U.S. consumer spending, which accounts for more than two-thirds of domestic economic activity, increased solidly in October, but personal income fell.

The dollar has come under pressure in recent months from expectations that U.S. interest rates will remain near historic lows for years to come, and as news of various COVID-19 vaccines helped boost investors’ appetite for riskier currencies.

Sterling edged higher after British Finance Minister Rishi Sunak announced a one-year spending plan to parliament, along with new forecasts for the country’s coronavirus-hit economy. 

The greenback is also close to a two-month low against the Australian dollar and a two-year low against the New Zealand dollar, both considered barometers of risk sentiment due to their close ties with the global commodities trade.

 

Today’s Market

• EUR Germany Ifo Business Climate Index
• NZD New Zealand Trade Balance
• JPY Japan Tokyo Consumer Price Index (CPI)

Today’s Focus

It’s a relatively quiet day ahead on the economic calendar for the Euro and Sterling. From Germany, GfK Consumer Climate figures for November are due out. While the EUR tends to respond to the numbers, any downside move may be muted by the latest COVID-19 vaccine news. Consumer confidence is likely to get a boost from hopes of an imminent COVID-19 vaccine that would support an easing of containment measures.

From the ECB, the ECB’s monetary policy meeting minutes are due out later in the day. We can expect some EUR sensitivity as the markets look for clues on what policy moves are likely next month. Away from the economic calendar, Brexit and COVID-19 news will continue to influence.

Across the Pond, it’s a quiet day ahead for the U.S Dollar, with the U.S markets closed for Thanksgiving.