Peso Rises, Buck Slightly Weaker, Emotional Week

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Peso Rises, Buck Slightly Weaker, Emotional Week

NOVEMBER 20, 2020

The U.S. Dollar is trading in tight ranges after two days where there was a mix of skepticism as well as hope that the long-term will look better than the dire present. 

Overview

COVID-19 and its economic effects keep plaguing a globe uneven in its containment as well as its approach to addressing labor and other impacted sectors. Stock indexes saw little action as market watchers keep getting teases about the true progress behind any fiscal package negotiations in Congress. Thursday evening welcomed the idea of House of Representatives’ leadership saying they had some framework agreement with the Senate.

Nevertheless, investors are now rattled by a discussion between Treasury Secretary Steven Mnuchin and Fed chairman Jerome Powell about a letter in which the former is demanding the latter return money to the government used in certain new lines of lending. Powell is in disagreement as he wants the full scale of emergency lending programs there. This all relates to the Cares Act and government attempt to take back money assigned months ago to the Cares Act.

Not much in terms of data, but it will be interesting to see if any major slowdowns in Purchasing Managers’ Index figures which will be released at 9:45AM. Recent indicators have demonstrated that there is indeed a pause to economic progress in the last two months.

What to Watch Today…

  • No major events scheduled for today

View this month’s Economic Calendar

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EUR  

The Euro has found a comfort zone and sticking to it as this week no major changes occurred as headlines focus on the world’s efforts to combat COVID-19. With lockdowns priced in, we will need to keep a close eye on economic indicators as well as infection reductions to see much of a move as we enter the last phase of the year.

In virtual meetings throughout the week, European officials mostly re-emphasized their willingness to try it all to help and hope that the fiscal aid does its part.

MXN  

The Mexican Peso strengthened this week by 1.2% riding the wave of optimism that improved the outlook for commodity-based currencies, especially after the MSCI Emerging Markets Currency Index hit a multi-year record Monday. While energy costs remain uncertain, the reality is that a vaccine potentially coming to the emerging world would change the outlook for 2021 tremendously and MXN is perceived as one currency with plenty of potential. We shall also see if the central bank continues its stance on not reducing interest rates after November 12th’s meeting ended with no action.

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