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By XE Market Analysis December 2, 2020 2:43 pm
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    XE Market Analysis: Asia - Dec 02, 2020

    The Dollar attempted to move higher through the London morning session, though again came under pressure through the N.Y. session. The DXY touched lows not seen since April of 2018, bottoming at 91.11, and down from opening highs of 91.50. USD losses came on the back of a largely disappointing ADP jobs report. Wall Street opened lower, with profit taking initially a driver following the record NASDAQ and S&P 500 closes on Tuesday. Stocks later fought their way back to shallow mixed territory, on positive Covid vaccine news from the U.K., and Operation Warp Speed hopes to have 100 mln Americans vaccinated by the end of February 2021. Treasury yields headed to multi-week highs. EUR-USD printed 32-month highs of 1.2108, up from 1.2040 lows into the open, while USD-JPY fell from 104.75 to 104.42. USD-CAD topped at 1.2959 early, later touching 1.2930 lows. Cable meanwhile, underperformed, trading between 1.3248 and 1.3365, well off overnight highs of 1.3441.

    [EUR, USD]
    EUR-USD topped at 1.2088 before pulling back to 1.2040 at the N.Y. open. Since then, another bout of Dollar selling took the pairing to 32-month highs of 1.2108. EUR-USD moves to the upside continue to be driven by USD weakness, with today's rally likely the result of the U.K.'s approval of the Pfizer Covid vaccine, with distribution set to roll out as soon as next week. This has taken some wind out of the safe-haven Dollar's sails on Wednesday. The ECB, which had raised red flags on EUR strength in the past, has been quiet so far this week, but it would not be surprising to hear some verbal intervention from Bank officials at some point in the near future. Negative U.S. real interest rates, along with the Fed's lower for longer stance, and perhaps more asset buying in the cards, do not bode well for the USD for now, and while we look ahead to 2021, widespread vaccine distribution should open up economies, and keep equity markets on the rise, another USD negative.

    [USD, JPY]
    USD-JPY headed from seven-session highs of 104.75 at the open, subsequently falling to 104.42 by mid-morning, as the risk-sensitive Yen firmed up on Wall Street losses. More recently, the pairing perked up to 104.60 as stocks cut their losses. The USD continues to have a hard time, with the DXY posting six-consecutive sessions of lower daily lows. For USD-JPY ranges have remained relatively narrow, with both the USD and the JPY considered safe-haven currencies, which tend to move in the same direction depending on the risk backdrop. USD-JPY has maintained a range of 103.83 to 104.75 for the past week.

    [GBP, USD]
    Cable hit a four-session low of 1.3288 in N.Y. morning trade. The Pound more than gave back short-lived gains seen following news that the UK government approved the Pfizer-BioNTech Covid vaccine. Cable posted a high at 1.3441 in early London trading, before hitting lows under 1.3300. Selling into gains was a feature, as the lack of a breakthrough in down-to-the-wire EU-UK trade negotiations -- especially as EU chief negotiator Barnier warned EU states to be ready for a no-deal scenario, weighed on Sterling sentiment.

    [USD, CHF]
    EUR-CHF from 1.0872 highs in N.Y. on Wednesday, later falling back to 1.0813. Positive Covid vaccine news, along with the formal start of the transition to a Biden presidency, turned sentiment higher last week, largely keeping the cross over the 1.08 level. EUR-CHF had struggled to hold the level since the summer, and will likely remain altitude limited going forward unless the risk-backdrop holds up. In addition, the cross will remain under pressure should the ECB embark on further easing in December.

    [USD, CAD]
    USD-CAD recovered modestly from the 26-month low of 1.2916 printed in London, making its way back to 1.2959 into the North American open. The USD generally got a brief reprieve through the London morning session, after the DXY printed fresh 32-month lows, though remains heavy overall. The pairing later eased to 1.2930 lows, as oil prices rallied following reports OPEC may be near a deal to extend production caps through Q1 of 2021.

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