29/ 11/ 2020

Week Ahead | Vaccine Optimism, Risk appetite, Brexit & Economic Data in Focus

The dollar weakened on Friday, set to post weekly losses with traders expecting large-scale stimulus from the new administration to combat the Covid-19 pandemic. The dollar has fallen more than 2% so far this month after Democratic U.S. President-elect Joe Biden’s election victory and positive COVID-19 vaccine progress, which has reduced demand for safe havens. Optimism over several COVID-19 vaccine developers announcing positive results for their offerings over the last two weeks, put the dollar under pressure as investors sought risker assets. Also boosting the trend was the beginnings of a transition from incumbent President Donald Trump's administration to that of President-elect Joe Biden. Biden has made it clear that tackling the pandemic is his first priority, and has called on U.S. lawmakers to pass a new stimulus bill before he officially takes office in January.

The Australian dollar - seen as a proxy for risk along with other commodity currencies like the Kiwi and the Canadian dollar - was last up against greenback. Weakness in the U.S. dollar amid thin trading due to the Thanksgiving holiday bolstered sterling, which has approached its September high recently on optimism over Brexit talks between Britain and the European Union. Analysts cautioned that the pound could be in for a bumpy ride in the months ahead despite its current strength, as the twin threats of Brexit and the Scottish vote crystallise. The British pound declined against the euro as the European Union and Britain said substantial differences remained over a Brexit trade deal as the EU chief negotiator prepared to travel to London in a last-ditch attempt to avoid a tumultuous finale to the five-year Brexit crisis.

Economic data took a back seat in the week as the markets continued to respond to positive COVID-19 vaccine news. 

26/ 11/ 2020

ECB and Brexit Put the EUR and the Pound in Focus

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 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.

It’s a relatively quiet day ahead on the economic calendar for the Euro and Sterling. From Germany, GfK Consumer Climate figures for November with 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.

25/ 11/ 2020

Risk Appetite is on pushing the Dollar Under Pressure

The dollar nursed losses on Wednesday as progress in developing a novel coronavirus vaccine and expectations for a fiscal boost from a new U.S. government triggered a shift of funds from the greenback to riskier assets. The U.S. currency teetered near 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. Bitcoin, a cryptocurrency known for extreme volatility, also traded near an all-time high, in a further sign that investors are growing more comfortable taking on riskier positions.

The U.S. dollar’s declines are likely to continue because a vaccine and the expected choice of former Federal Reserve Chair Janet Yellen as U.S. President-elect Joe Biden’s next Treasury secretary relieve two big uncertainties for investors. “The trend has shifted to favor risk assets. Yellen will team up with the Fed and support the economy. U.S. rates will remain low for a long time.” stated by a Senior Foreign Exchange Strategist.Research suggesting that a COVID-19 vaccine could be available before year end has sent U.S. stocks surging to record highs and reduced the appeal of holding the dollar as a safe-harbor currency. Risk appetite has also improved after the outgoing U.S. President Donald Trump’s administration began cooperating with the Biden transition, and after reports that Yellen, an advocate of more fiscal spending, will take the top job at Treasury.

It’s a busy day ahead on the economic calendar, as the markets continue to respond to vaccine news with U.S stats in focus. The FOMC minutes will also draw interest.

24/ 11/ 2020

Markets Anticipating for AstraZeneca's Data Submission to Authorities

The dollar bounced off an almost three-month low against a basket of currencies hit on Monday following optimism over another COVID-19 vaccine as the index approached a technical support level that if broken, could signal further weakness for the greenback. The dollar had weakened as risk appetite got a boost after AstraZeneca said that its vaccine could be about 90% effective and it would prepare to submit data to authorities around the world that have a framework for conditional or early approval. Investors are balancing the prospect of a closer rollout of COVID-19 vaccines against worsening U.S. economic data as a rise in COVID-19 cases again leads to business shutdowns.

It’s a relatively busy day ahead on the economic calendar for the EUR. Finalized 3rd quarter GDP and November IFO Business Climate Index figures from Germany are due out. Late in the day, ECB President Lagarde is due to speak. Any monetary policy chatter will provide the EUR with direction. There are no material stats due out from UK, leaving the Pound in the hands of Brexit and market risk sentiment. Across the Pond, it’s also a relatively busy day ahead for the U.S Dollar. November consumer confidence figures are due out late in the day. With the U.S reintroducing containment measures to curb the spread of the COVID-19 pandemic, a fall in confidence is likely. Weaker retail sales figures from last week and a further decline in consumer confidence would weigh on riskier assets. Hopes of a COVID-19 vaccine, however, should limit the damage.