Dollar weaker after gains earlier in the week as sentiment turns positive despite Covid headwinds.
The dollar lost ground to both higher risk emerging market currencies and safe haven yen and Swiss franc. Equity markets are set to rise in the US as global investors continue to favor risk-on strategies despite warnings by central bankers at yesterday's ECB Forum that Covid will continue to be a drag on the global economy well into 2021.
November 13, 2020
EUR/USD 1.1823 GBP/USD 1.3165 USD/CAD 1.3132 AUD/USD 0.7250 USD/JPY 104.77 USD/CNH 6.6052 USD/ILS 3.3680 USD/MXN 20.5210 USD/CHF 0.9135 USD/INR 74.6025
The US dollar is weaker this morning after rising for most of the week. PPI for October came in slightly lower than expected. Speaking at the ECB virtual conference yesterday, Fed Chair Powell raised concerns over the recovery of the US, as Covid-19 cases continue to rise and a divided government is likely to delay or reduce any fiscal stimulus agreement.GBP
The pound is ending the week flat as financial markets discount impacts of Covid and trade talks. GBP is up 2% this month vs. the USD.
Bank of England head Andrew Bailey has confirmed that there is no exact date in mind when negative rates may be used and that a significant amount of work would need to be done to determine whether it would be “doable”. Dominic Cummings, who helped orchestrate the Brexit vote in 2016, last night confirmed that he will be leaving his role by the end of the year.EUR
The euro is slightly stronger this morning but lost ground to the dollar over this past week. Brexit negotiations seem to have once again reached a stalemate as fundamental differences around access to the single market remain. Officials suggest that an agreement must be reached next week to ensure it can be ratified by year end. Speaking at the ECB Forum on central banking yesterday, President Lagarde cautioned that a coronavirus vaccine will not quickly reverse any economic downturn.CAD
The Canadian dollar is heading for its fourth consecutive day of losses despite oil prices increasing 8% this week. Still, the loonie is 1.4% stronger this month with oil up almost 20%. The price of oil has been stable since June trading in a range between $35-$42 per barrel. The C-dollar has strengthened over the same period from around 1.35 to 1.31, mostly due to overall US dollar weakness.ASIA/PACIFIC
The yen made gains against the US dollar as a new wave of coronavirus cases across the globe increased demand for the safe haven currency.
The Chinese renminbi was steady for the week holding onto last week's gains. The renminbi is expected to continue its strengthening trend which began in June as the Chinese economy has resumed growth after the initial Covid shock. Also, a Biden presidency is presumed to be less prone to anti-China outbursts.
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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