U.S. Dollar sinking with trade and health breakthroughs

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U.S. Dollar sinking with trade and health breakthroughs

NOVEMBER 16, 2020

The U.S. Dollar is losing ground as optimism is the ingredient to start the week with as the globe welcomes more news about vaccine trials by companies Moderna and AstraZeneca that could mean we are near a time to make a serious dent on COVID-19 infections. 

Overview

Additionally, the global recovery narrative is being helped by speculation that incoming President Joe Biden will not be seeking to call for a national lockdown.

New York City, Chicago, and other major cities have prepared to enforce more restrictions, but markets are fond of the idea of not returning to March/April-like rules. Asian and European trading sessions also got a boost from impressive Industrial Production and Retail Sales for October out of China exceeding expectations.

Furthermore, the Asian powerhouse economies of China, Japan, and South Korea signed a historic free-trade agreement that makes it the biggest regional pact, surpassing the EU and USMCA (NAFTA 2.0). The RCEP, Regional Comprehensive Economic Partnership, is also accelerating the appreciation of the Australian Dollar and New Zealand Dollar, which are currently near their best levels since mid-September.  Per the Bloomberg Dollar Spot Index, the buck is overall trading around its weakest point in two years.

What to Watch Today…

  • No major events scheduled for today

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Catch the latest movements in FX in our November Currency Outlook

Monthly Currency Outlook

GBP  

The Pound picked up some value last week and may continue seeing swings as we enter an important week for the U.K. First of all, there is a national lockdown and Prime Minister Boris Johnson is currently isolating himself.

His decision-making will also be cause for pondering after he lost Dominic Cummings to resignation last week who guided much of his stance and approach on Brexit matters. Ministers are once again preparing to delay the deadline and push for more room on the negotiating table. More talks today, but chief negotiator, David Frost, sees the U.K. maintaining its position for now.

MXN  

The Mexican Peso is trading near its strongest levels since the start of March following last week’s hopes for vaccine treatments and now aided largely by the trade pact agreed on in Asia. 

Oil and energy costs could go down per estimates by OPEC+ and the IEA (International Energy Agency), but the weekend’s developments set the wheels in motion for major movement of raw materials, which certainly benefits commodity-based tender all across the board.

If the buck is to see upticks in moments of doubt, at the moment the trend is on the side of risk-appetite and we may see further advancement for plenty of currencies, especially those included in the MSCI Emerging Market Currency Index (BRL, CLP, PLN, ZAR, etc.)

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