The Dollar’s Decline Accelerates

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The Dollar’s Decline Accelerates

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Another day, another sell-off for the dollar. 

Overview

The beleaguered greenback is down across the board and reached fresh 2.5-year lows versus the Euro and the British pound. Overall, the greenback is down for the fourth consecutive day.  The biggest loss came against the Norwegian krone after their central bank indicated it could start raising interest rates earlier than previously thought.

U.S. equity futures are solidly in the green this morning on optimism a Covid relief bill can be agreed upon shortly.  Knowing full well that we sound like a broken record, today could be the day.  Markets are expecting lawmakers to agree to the bipartisan $900 billion deal that includes payments to individuals.  Government funding runs out tomorrow evening, so time is of the essence.

This morning’s economic docket is busy.  Weekly jobless claims rose 23K last week to 885K. The reading is worse than the 818K expected and highlights continued weakness in the labor market, which could get worse as some stats look at fresh lockdown restrictions.  A separate report showed that business activity in the Philadelphia region slowed, with the index falling to 11.1, missing estimates of 20.0.  The six-month outlook fell to 39.2 versus an expectation of 44.3.  The Kansas City Fed manufacturing index is out at 11 a.m.

What to Watch Today…

  • Kanasa City Fed manufacturing at 11 a.m.

View Economic Calendar

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CAD  

The Canadian dollar has also taken advantage of the generally weaker dollar, improved risk sentiment, and rising oil prices.  The loonie has gained three out of the last four days against the buck and is within 0.2% of its strongest level since April 2018.

GBP  

The pound continues to extend its gains as traders increase bets that the European Commission and the United Kingdom will reach a post-Brexit deal by the end of the year.  The headlines are fluid and often contradictory, but the trend for the sterling is clear: strength.

Deadlines have come and gone but the immovable date for the U.K. to crash out of the EU without a trade deal is December 31st.  Moments ago, it was reported that the European Parliament decided it will not be able to ratify any treaty before the end of the month unless the deal is concluded by Sunday.  Ok, so now this Sunday appears to be the new deadline to reach a deal. While we will not be holding our breath over the weekend, the EU chief negotiator added to the optimism by saying that deal could be struck as soon as tomorrow.

Meanwhile, the Bank of England kept its asset purchases and interest rates unchanged, which was widely expected.  BOE headlines have taken a backseat to Brexit headlines.

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