A US election outcome and positive news on vaccine boosted sentiment and stocks while safe haven currencies take a hit
The US seems to have an election outcome removing uncertainty from financial markets and continuing the US dollar sell-off for a third day. A clinical trial led by Pfizer and BioNTech showed promising initial results adding to equity gains and sending the price of oil higher. The US dollar lost vs. nearly every currency except the safe-haven Japanese yen and Swiss Franc. The Canadian dollar surged to its strongest level in two years.
Economic Data for this Week:
Tuesday: JOLTS job openings for September
Thursday: Weekly Initial Jobless Claims, CPI data for October
Friday: PPI for October, Univ. of Michigan Consumer Confidence for November
November 9, 2020
EUR/USD 1.1906 GBP/USD 1.3188 USD/CAD 1.2939 AUD/USD 0.7325 USD/JPY 104.93 USD/CNH 6.6140 USD/ILS 3.3567 USD/MXN 20.2542 USD/CHF 0.9069 USD/INR 74.1438
The US dollar lost ground again to most currencies and is beginning to show signs of a significant downward move. The prospect of a Biden Presidency with Congress split tells financial markets no massive shifts in government spending in the short term. Positive news of a possible Covid vaccine led investors to adopt a more bullish position on a possible end to the pandemic in 2021. The dollar’s safe haven status becomes less of a factor as Covid subsides and the election results become final.GBP
The pound is stronger on overall dollar weakness and hopes the UK and EU can successfully negotiate a new trade agreement by year end. A soft deadline of November 15 to have an agreement seems possible now after some key terms have apparently been negotiated. Any trade agreement still must be voted on by the UK and EU member states before taking effect leaving little time before the December 31 hard deadline.EUR
The euro broke above 1.19 for the first time since early September. However, gains for the common currency vs. the dollar were muted compared to other currencies. The UK/EU trade negotiations are moving forward, and the ECB Form scheduled for later this week will be closely watched as many central bankers from around the world plan to speak.CAD
The Canadian dollar hit its strongest level since October 2018 breaking through the psychologically important 1.30 level. The price of oil surged 10% this morning on news of successful Covid vaccine trial data and OPEC potentially continuing the supply cuts from earlier this year.ASIA/PACIFIC
The Japanese yen declined today as safe haven flows lessened following US election results. The Aussie and New Zealand dollars both surged on the US election outcome and positive vaccine news. The Chinese renminbi added to gains and is now 8.5% stronger since the summer. A recovery in the global economy will benefit Asian exporters and especially China.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory