Dollar Extends Losses Even as Risk is Flat

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Dollar Extends Losses Even as Risk is Flat

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Another day, another drop for the greenback.  The dollar is lower against most of its counterparts, touching fresh 2+ year lows versus the Euro, Australian dollar, and Korean won. 

Overview

The dollar is under pressure even as the rally in global equities took a breather overnight.  Perhaps negative Covid headlines outweighed good vaccine news.  The U.S. experienced its deadliest Covid day yesterday, and Los Angeles issued a stay at home order.

Further progress on a bipartisan stimulus bill could be the catalyst to reignite risk appetite and cause traders to sell dollars further.  A handful of Federal Reserve officials have been yelling from the rooftops that fiscal spending is needed to bolster the bank’s monetary easing.  The proposed $908 billion deal is less than half of the $2 trillion bill that markets hoped for before the election, but it is viewed as better than nothing.

This morning’s jobless claims data is likely to be shrugged aside considering the reporting period was over the Thanksgiving holiday and likely skewed.  Tomorrow’s Non-Farm payroll print remains the week’s headline event and comes after disappointing private payroll data released yesterday. Later this morning, Markit and IHS will release their service PMIs.

What to Watch Today…

  • Markit and IHS Service PMIs

View this month’s Economic Calendar

Hear Juan Perez, Senior FX Strategist, deliver the latest in currency news from Powell’s remarks to the future of bitcoin. Listen now

Juan Perez on LeFonti

EUR  

The Euro has been off to the races after breaking a key psychological and technical level without any push back from central bank officials.  The debate among many traders has changed from “will the Euro strengthen more?” to “how much more?”

Bloomberg News put it best, so I will borrow their analysis: Overall, striking similarities with a rally that followed the 2017 France election suggest that a firm bullish trend is in place, backed by a stronger confidence in the euro-area project – this time due to the unprecedented fiscal and monetary stimulus unveiled amid the Covid-19 pandemic.

There are still plenty of stumbling blocks in the way of a sustained Euro rally but for now, it is wise to stay clear of the tracks when the train is coming through.

GBP  

Yesterday’s pullback in the sterling seems to be an anomaly as the currency is on the offensive again and heading towards its yearly high versus the greenback.  Indeed, GBP/USD is less than half a percent away from its 2020 high.

The newest round of Brexit optimism was caused by comments from Irish foreign minister Simon Coveney, who said there is “a good chance” of getting a trade deal across the line in the next few days.”  He continued to say that the EU must “hold our nerve” and trust in Michel Barnier, the EU chief negotiator.

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