Buck Drops as Markets Rally on Vaccine Hope
The U.S. Dollar is being pulled all over the place as we get developments on a potential vaccine solution and Europe takes a major step towards economic recovery.
France’s President Emmanuel Macron and Germany’s Chancellor Angela Merkel reached a deal to provide €500.0 billion in grants as aid to member nations as needed. While already facing some resistance, the plan lifted the currency as the merit is deserved. The EU’s situation has been worrisome when it comes to reaching agreements and the two-country move highlights need for cohesiveness within the large EU parliament. This naturally has translated into optimistic and flourishing trading sessions that are helping sink safe-havens such as the Japanese Yen to their weakest level in over a month.
There seems to be a revival of spirits across markets and the buck is seeing losses against most counterparts. Not only are Euro and Pound higher, but the petro-currencies (MXN, CAD, NOK) along with the commodity-based (AUD, NZD) are up by an average of almost 1.5%. We shall see if Federal Reserve Chairman Jerome Powell creates any waves as he speaks to the Senate later at 10AM. Treasury Secretary Steven Mnuchin has been trying to ease fears based on Powell’s Sunday 60-minute interview in which he said downside risks in the economy were high.
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Indeed, the shared currency is rising, and recuperating ground last seen at the beginning of the month. The positive energy behind Euro follows the historic emergency package grants in store from Germany and France. Additionally, there is renewed confidence, especially in Germany, where German Investor Confidence as surveyed by ZEW jumped to its highest in five years.
Italian cities have been shown on TV adapting to wearing masks, but people are definitely out and about. As the world re-opens, the momentum is on the EU’s side being helped tremendously by Chinese officials and putting together assistance to keep the continent stable. Volatility is still high, but Euro may be starting something.
Another winner is the “Loonie,” which is strengthening on the basis of better than expected demand for oil from China as they relaunch all factory work. Oil is certainly helping the Canadian Dollar as prices for WTI and Brent shoot higher based on the fact that production has also been scaled down successfully, particularly in the production of shale oil. It is the most expensive CAD in over two weeks.