The U.S. Dollar is trading in mixed direction, losing some ground to major peers in Europe, but still gaining ground against Canadian Dollar and the petro-currencies, as well as the Antipodean currencies of “Aussie” and “Kiwi.”
Overview
A heavy dose of realism is what has taken a hold of global markets as COVID-19 pushed governments to enact strict restrictions to regular activity, which was returning and has helped in the past six months.
Nevertheless, even the central banking authorities that have orchestrated much of the rescue are saying that a vaccine will not be enough to economically improve things as needed and in the time risk-takers are hoping. The battle we are all in is a serious one that will take more government action and further planning so that it is actually eliminated as a constraint on daily life. Jerome Powell did not mince words in saying that while a recovery has taken place, the further spread of the virus in the U.S. is the ultimate threat to the economy. Andrew Bailey of the Bank of England and Christine Lagarde of the European Central Bank agreed that while news can be encouraging, a lot more is still left to do.
They all recognized that a lot of labor may not come back and thus the fiscal support needed moving forward will be substantial and has to be consistent to make up for displacement post-pandemic. We saw the figures for the Purchasing Price Index, a gauge of inflation, which came in a bit better than expected for October, but there could be downward pressure as COVID fears exacerbate with New York and Chicago going back to setting restrictions.
What to Watch Today…
- No major events scheduled for today
View this month’s Economic Calendar
Catch the latest movements in FX in our November Currency Outlook…
GBP ⇑
The Pound managed to gain 1.7% of value this week as news of potential vaccine solutions rallied markets and the talks for Brexit went on. However, the initial expectation for a friendlier tone earlier this week slowly withered away and now we are seeing that the talks produced no progress.
These swings for the Pound will remain as now the focus is primarily on what arrangement the EU and U.K. can keep, especially as Irish interests start being compromised via confusing hard borders and dissatisfaction from Scotland. Unless there is major breakthrough in the next few weeks, these current high levels could go away quickly.
MXN ⇓
The Euro stayed mostly even this week after originally looking to strengthen as the positivity surrounding sentiment in markets earlier in the week aided it. Gross Domestic Product figures for Q3 came in at 12.6%, which was close to expected.
At the moment, figures are figured to potentially be affected in a very negative way for Q4 as lockdown inactivity weighs on the continent. We have a tough road ahead that will be marked by moments of rejoicing and hope as the year closes with anxiety over a resolution.
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