Daily FX Update: Dollar sell-off picks up steam

The US dollar is falling for a third consecutive day as new stimulus package gains widespread acceptance in Washington DC

FX trading strategies are mostly pointing to a weaker dollar whether a new stimulus package is passed or not. With additional stimulus, FX markets see less uncertainty and therefore sell the safe haven US dollar. If additional stimulus is delayed, smaller than expected, or does not pass at all then FX markets see a weak US economy through all of 2021- especially compared to China, Europe and other countries. Markets await news of an EU/UK trade deal with some EU member countries suggesting a possible veto.

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  • FX Rates
    December 3, 2020

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    Dollar losses in December are approaching 2% in just 3 days. A group of cross-party senators and house members proposed coronavirus relief measures worth $908 billion. Joe Biden later endorsed the package, suggesting it would not solve the issues but would provide immediate relief to those suffering until a full stimulus package can be agreed. Although the House Speaker and Senate Minority Leader also showed support for the bill, it would still need to be passed by President Trump to be implemented.

    GBP

    The pound is at its strongest level since June 2018 despite no UK/EU trade agreement. Once negotiators have agreed to a trade agreement the individual countries must vote to accept it. France and a few other countries have indicated they may veto any agreement if they don’t like it.

    EUR

    The euro soared to levels not seen since June 2018 with FX market watchers now suggesting the 1.25 level is within sight. Any reversal of long euro/short USD trading positions due to a failure in the UK/EU trade talks would mean a sharp correction with the euro temporarily selling off.

    CAD
    The loonie is rallying this morning despite a drop in oil prices. Overall US dollar weakness superseded news that OPEC+ may be close to an agreement to taper production cuts throughout 2021.
    ASIA/PACIFIC

    The Japanese yen is testing the 104 level and may fall to the 2016 lows of 100. 

    The People’s Bank of China set the onshore renminbi rate 19 basis points stronger overnight versus the US dollar. Chinese authorities allow the renminbi to trade within a 2% band around the official rate setting. China’s containment of Covid has led to a strong recovery in their economy providing a boost to the renminbi which is expected to continue well into 2021. 

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For more analysis on FX markets or information regarding SVB's FX services:

Contact your respective SVB FX Advisor or the SVB FX Advisory Team at fxadvisors@svb.com.
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory

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Peter Compton
WRITTEN BY
Peter Compton

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