Risk-on mood amid US vaccine deployment, upbeat US stimulus bill, Brexit news
Markets began the week in a bullish risk-on mood as investors were buoyed by upbeat news: Covid-19 vaccines will be deployed in the US this week; a bipartisan group in Congress may be ready with a pandemic relief bill; and, a UK/EU Brexit trade deal which still has potential for success this week. The dollar index dropped to fresh lows, as the UK pound outperformed G-10 currency peers. Equities are showing gains at the open, UST yields edged higher, and oil prices increased to $47.07 a barrel. This week, there is a full docket of global economic releases and central bank meetings, including the Fed, BOE, BOJ.
US Empire State Manufacturing (Dec)
US Industrial Production (Nov)
US Capacity Utilization (Nov)
China Industrial Production and Retail Sales (Nov)
UK Employment data (Oct)
US Federal Reserve monetary-policy decision
US Retails Sales (Nov)
US Business Inventories (Oct)
US Manufacturing and Services Purchasing Managers’ Index (Dec)
Central bank meetings: United Kingdom, Mexico, Switzerland
US Building Permits & Housing Starts (Nov)
US Leading Economic Index (Nov)
Central bank meetings: Japan, Russia
December 14, 2020
EUR/USD 1.2157 GBP/USD 1.3369 USD/CAD 1.2735 AUD/USD 0.7569 USD/JPY 103.6700 USD/CNH 6.5285 USD/ILS 3.2568 USD/MXN 20.1040 USD/CHF 0.8865 USD/INR 73.5712
The US dollar dropped to fresh lows, as investors shift into risk-on mood in the markets. The dollar was sold amid news on vaccine deployment this week, a potential breakthrough in Congress with a $908Bn pandemic relief bill, and a possible Brexit trade deal. Increased global demand for US dollars for year-end funding purposes is starting to show up in currency option pricing.GBP
The UK pound climbed as high as 1.7%, its largest gain in nearly two months following news that the UK and EU will carry on negotiating, providing hope that an agreement can still be reached before the December 31 deadline. The EU’s chief negotiator, Michel Barnier, said a trade deal could be agreed upon this week.EUR
The euro edged higher by nearly 0.5%, in-line with broad dollar weakness. Traders await Brexit news and begin to position for year-end funding needs.CAD
The Canadian dollar gained versus a broadly weaker dollar, fueled by a risk-on mood in the markets. The USD/CAD currency pair is trading around 1.2725, not far from last week’s low at 1.2707 and the lowest since April 2018.ASIA/PACIFIC
Buoyed by demand from China for iron ore, the Australian dollar soared to fresh highs. Australia is the world’s largest producer of iron ore - used to make steel.
The Chinese yuan and Japanese yen were little changed.
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