Optimism lifts currencies as US stimulus package seems closer and Brexit negotiations continue.

Optimism lifts currencies as US stimulus package seems closer and Brexit negotiations continue.

A US dollar index hit its lowest since fall 2018 as risk adverse FX traders favor the Chinese renminbi, Japanese yen and Swiss franc. Also, financial markets are becoming less concerned about volatility from the US election and hopeful of a new stimulus from Washington DC. A trade agreement between the UK and the EU seems possible helping the euro and pound with both sides negotiating after Boris Johnson’s self-imposed October 15 deadline came and went. The Chinese renminbi strengthens again.

“The way to get started is to quit talking and begin doing.”

Walt Disney
  • FX Rates
    October 21, 2020

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  • USD

    The dollar is weaker for a fourth day and bumping along lows for the year. With Republicans and Democrats continuing to negotiate a stimulus package, the financial markets are betting a deal will get done soon. Also, financial markets seem to have either priced in a contested US presidential election or discounted such an event. The dollar’s safe-haven status is weakening as the yen and Swiss franc both strengthen.

    The Federal Reserves Beige Book will be released this afternoon.


    The British pound gained almost a full percent after the European Union's chief Brexit negotiator said an agreement with the UK was within reach.


    The euro gained vs. the US dollar despite German PPI continuing to decline although it came in above expectations at -1.0% YoY, and 0.4% MoM. FX speculators piled into bets the euro will hit 1.20 as it did in September. With Biden holding a substantial lead in the polls, financial markets are hoping for a smooth transition of power and better trade relations from the US.


    The Canadian dollar is flat today on weaker oil prices. A potential confidence crisis is brewing in Canada with conservative opposition leaders fanning the flames on a potential ethics scandal surrounding Covid-related funds for schools. Prime Minister Trudeau has raised the possibility of a new General Election should the conservatives not back down.


    Asian currencies all strengthened relative to the US dollar as hopes of a stimulus package in the US and a Biden win relieved uncertainty. The Chinese renminbi continues to strengthen as a new US president may help relations and the Chinese economy continues to grow. The Japanese yen gained as did the Australian dollar on overall US dollar weakness.

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Peter Compton
Peter Compton

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