Investor optimism weakens safe haven currencies
The dollar began the trading week by losing ground relative to most currencies while commodity currencies gained on hopes stimulus spending will rescue US and global economic activity. The Japanese yen joined the greenback as safe haven currencies lost ground. Financial markets will look for clues on fiscal policy during Janet Yellen’s comments on Capital Hill later this morning and for a peaceful inauguration on Wednesday.
Today: Janet Yellen Senate confirmation hearing for Treasury Secretary nomination
Wednesday: Presidential inauguration
Thursday: Initial jobless claims, Housing Starts for December
Friday: PMI for January and Existing Home Sales
January 19, 2021
EUR/USD 1.2136 GBP/USD 1.3611 USD/CAD 1.2741 AUD/USD 0.7715 USD/JPY 103.9500 USD/CNH 6.4849 USD/ILS 3.2385 USD/MXN 19.6773 USD/CHF 0.8877 USD/INR 73.1700
FX markets sold the dollar to begin the week on optimism Biden’s $1.9T in stimulus spending will help bridge the US economy to a full recovery later this year. Also, financial markets see the Federal Reserve holding its current ultra-easy monetary policy throughout 2021 and possibly as far as 2023.GBP
The pound is stronger vs. the US dollar this morning on overall dollar weakness. Financial markets are looking beyond the UK’s current Covid related lockdown and see a stronger economy once vaccinations are completed and Brexit uncertainties are gone.EUR
The euro is stronger as FX traders see the US dollar resuming its weakening trend which began last March. The European Union will begin selling bonds to help pay for European stimulus agreed last July. The bond sales may become a steady source of euro demand if investors outside the eurozone choose to bid for the bonds.CAD
The Canadian dollar is stronger this morning following all commodity currencies higher despite global demand for oil in question as Covid cases rise in parts of China and lockdowns continue to disrupt travel plans.ASIA/PACIFIC
The Chinese yuan is stronger as FX markets search for clues on incoming President Biden’s policies on China. The Chinese authorities are seen as trying to keep the yuan stable leading into next month's Lunar New Year week-long holiday.
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
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