No Vaccine Timeline Slowing Down Rally

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No Vaccine Timeline Slowing Down Rally

NOVEMBER 17, 2020

The U.S. Dollar is experiencing mixed direction as major peers in Europe remain buoyant while petro-currencies other commodity-based currencies take a break from their rally. 

Overview

Yesterday’s start to the week with such positive news on the vaccine front elated global markets, even helping the Dow Jones Industrial Average almost reach the magical 30,000.

However, once more, the reality is grimmer than sentiment and until the infection can be contained for people to safely go about their business, the dollar will remain a source of safety that can immediately perform better than anything it is paired with. Stocks brokers may not get to wear their celebratory headgear quite yet.

Retail Sales this morning are cause for this renewed concern that economic momentum is already hurt and could get worse unless COVID-19 is defeated. October figures disappointed, coming in at a measly 0.3% advance while the estimate was 0.5%. Worse, the September measures had to be downwardly revised, so it came out to 1.6% instead of the 1.9% reported.

If activity slows down as shops close and restrictions are applied, December could see negative indicators, as in contracting instead of expanding, which surely could set up a major dollar rally to come. Again, the swings will continue because we have moments split between euphoria and disillusion.

What to Watch Today…

  • No major events scheduled for today

View this month’s Economic Calendar

Catch the latest movements in FX in our November Currency Outlook

Monthly Currency Outlook

EUR  

The Euro appreciated following the developments regarding vaccine breakthroughs, but the common currency may suffer as we get to the middle of the week. Germany and other nations are certainly locking down and taking away access to gyms and other places to gather.

Thing is, Euro resilience and perhaps even another bit of advancement can show up as EU Commission President Ursula von der Leyen struck a deal with firm CureVac to purchase 405 million vaccines. We will get a look at inflation in the form of Consumer Price Index tomorrow, which could have an influence on flows.

MXN  

The Mexican Peso failed to continue its resurgence, affected somewhat by the oil prices falling a bit on uncertainty over the global recovery’s true strength and plans for production that are confusing. 

This development and the tough road ahead before everyone is vaccinated and OK is also shaping the trend for other commodity-based currencies. Oil producers do not know if they should wait another 6 months to boost the production of barrels or if indeed the economy will demand it much sooner. Either way, instability in oil, as well as overall sentiment turning more negative, will keep these currencies volatile.

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