The dollar rebounded after a week of losses as Covid and lack of stimulus hit risk sentiment

Yesterday’s risk-on sentiment gave way to reality this morning as Covid cases globally continue to rise. Economic data out of Germany and the UK showed Europe’s economies may reverse recent growth while the European Central bank may have to announce more monetary easing when the Governing Council meets in a week's time. Markets await news on a stimulus package out of Washington DC.

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  • FX Rates
    October 22, 2020

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  • USD

    The dollar weakened today as Covid cases surge and economic data showed mixed results. Federal reserve governor Brainard said a failure by Congress to reach an agreement on further support for the economy is the biggest risk to the outlook, aside from the pandemic itself. The Fed’s beige book publication yesterday revealed that the US economy’s recovery has shown signs of slowing in recent weeks as Covid-19 begins to make a resurgence and highlighted the need for additional fiscal stimulus.

    GBP

    The pound is slightly lower after surging yesterday on hopes of a new UK/EU trade agreement. Bank of England member Ramsden confirmed that the central bank is not ruling out negative interest rates in the future. Core inflation remained steady at 0.5% yesterday as Public Sector Net Borrowing reached £36.1bn, the highest monthly level since records began in 1993.

    EUR

    The euro is weaker this morning after four consecutive days of gains vs. the US dollar. The European economy continues to struggle through the recovery as German consumer confidence fell this morning. The European Central Bank is expected to acknowledge that risks to the growth outlook have intensified as coronavirus cases continue to surge. Reports suggest that it is likely the size of the asset purchase program will be increased during next week’s committee meeting.

    CAD

    The Canadian dollar is steady vs. the US dollar on relief that a possible new general election can be avoided. Oil is steady and most commodities have generally seen an increase in price due to recent dollar weakness.

    ASIA/PACIFIC

    Commodity currencies such as the Australian dollar advanced vs. the US dollar earlier in the weak but are giving back some gains today on lower risk sentiment. The yen had its best day against the US dollar since August and now trades at its lowest levels since March.

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Peter Compton
WRITTEN BY
Peter Compton

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