Daily Market Pulse

USD continues to weaken


Although slightly up from its lows overnight, the USD continues its weakening bias. Today’s announcement of a successful Covid-19 recovery package out of Europe did more to lift the Euro than push down the greenback. Moreover, the dollar’s recent weakness appears unlikely to reverse itself anytime soon with several global banks calling for a move towards 1.2000 as the alarming rise in Covid-19 cases and deaths has caused traders to consider that the economic situation in the US is likely to deteriorate despite the robust equity markets.


After moving higher initially, the Euro eased back following the successful conclusion of the EU Economic Summit. The meeting, which was supposed to last only one day, dragged on for four as the group finally reached an agreement. The final package, which has been called historic, is worth €750 billion and was only reached through several compromises including satisfying the “frugal” countries - Austria, Germany, Denmark, and The Netherlands – by reducing the amount of the grants from €500 billion down to €360 billion.


The Pound is continuing yesterday’s rally following the successful conclusion of the EU Economic Summit. Yesterday’s jump caught traders off-guard as the market reacted favorably to reports of a UK Covid-19 vaccine and positive news on the Brexit front. Not all is positive however as a report is due to be released on Russian interference in the UK elections and the conservative party having ties. Also on the radar in increasing tension with China following the UK’s decision to cancel it extradition treaty and phasing out of Huawei technology.


The JPY is holding steady in its recent range as the market is unconvinced of any directional trend. After failing to take advantage of their equity market rally, the currency has drifted back and is merely wandering as technical traders try to identify any market pattern also at issue is that while inflation numbers were better than expected, deflation remains a real possibility. 


The Loonie strengthened again today, buoyed by increasing oil prices as it outperformed other commodity-based currencies. Oil prices are expected to continue rising following the OPEC agreement to curb production which encourages the move, however further Canadian strength may remain curbed following an article that cites HSBC as suggesting that the C$ will weaken considerably over the next 12 months. 


The Chinese Yuan is weaker today falling alongside its reputation on the world stage. Following its decision to impose strict restrictions and the removal of freedoms in Hong Kong, China experienced an outcry from many of its trading partners being seen as backpedaling on its commitment to allow the region more autonomy. In addition, it has further alienated itself on other hot button issues including its unjust territorial claims in the China Sea. 


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