Dollar Gains for the First Time in a Week
OCTOBER 22, 2020
The U.S. dollar is gaining for the first day in five, pulling off recent lows versus the Euro and British pound.
The dollar found support yesterday evening immediately after John Ratcliffe, the director of national intelligence, said both Iran and Russia had obtained voter registration data and that Iran was already using it to send threatening emails. Mr. Ratcliffe was light on details.
The dollar also found support as equities from Asia to Europe turned lower. American shares are also poised to fall at the open as hope for a stimulus deal before the election dwindled. It appears that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin (representing the White House) have made significant progress towards a deal that is said to be at 1.9$ trillion dollars. However, the Senate remains a major hurdle, with several members expressing resistance to the size of the deal and holding a vote before the election.
This morning’s data will show that weekly jobless claims remain extraordinarily elevated. Claims are expected to register at 870K last week, down from 898K jobs last week. Existing Home Sales will cross the wire at 10 a.m., followed by Kansas City Fed manufacturing at 11 a.m. There are also three Fed speakers scheduled for today
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The Euro sold-off from its one-month highs overnight, led by possible profit-taking and renewed modest greenback strength.
In addition, negative Covid-19 headlines throughout Europe could also be weighing on the common currency. No less than five countries, including Germany, reported record new cases yesterday. Many European countries had success slowing the virus in early summer and will have to do so again. Although this time it may prove more difficult as citizens experience lockdown fatigue.
The British pound experienced a strong rally yesterday; trading as much as 1.7% stronger against the greenback as talks between the U.K. and the E.U. continued past previous deadlines. The move in sterling was its biggest since March. GBP/USD has given back some of those gains overnight, slipping nearly half a percent, which is likely the result of position squaring after the large move. Traders will now look for evidence of concrete progress between the two sides. Formal talks are set to resume today.
Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak will hold a press conference later today. The two are expected to further detail their new fiscal support for U.K. businesses hit by Covid and new restrictions put in place to slow the virus.