Daily Market Pulse

Market players are pricing in a substantial move lower by the USD as soon as the new trading year begins


All the G-10 major currencies have printed gains against the greenback on Wednesday, albeit in the thin and low volume, year-end markets. The Dollar index which tracks the USD versus a basket of major currencies dropped 0.35% as rumors that the $2,000 stimulus check will be approved, albeit it has been blocked in the Senate, and speculations over results of run-off elections in Georgia next week that could potentially determine which party controls the U.S. Senate. Elsewhere, market players are pricing in a substantial move lower by the USD as soon as the new trading year begins


The single-currency rallied 0.39% with an improved tone to risk-on sentiment after rumors about the $2,000 stimulus check has risen after the U.S Senate decided to delay voting on the bill, with investors taking that as a possibility that it could pass. Meanwhile, European Central Bank (ECB) policymaker Jens Weidmann ruled out cheerful expectations that Germany’s debt burden during the pandemic will be smaller than that during the 2008 financial crisis, as well as Governments should not expect central banks to keep interest rates low forever.


The GBP climbed 0.90% against the U.S dollar on Wednesday after Britain authorized the use of a Covid-19 vaccine developed by AstraZeneca and Oxford University which is considered easier to store and handle than others hitting the market. Apart from the new post-Brexit agreement and vaccine optimism lifting the prospects for 2021, the market is also being supported by speculation about more near-term stimulus from governments and central banks.


The greenback plummeted 0.36% against the JPY on Wednesday after a day marked by low volumes and a delay in U.S stimulus discussions. However, market participants were looking at the latest Covid-19 cases and deaths across the U.S and Europe, which seems that the virus is once again accelerating its spread and putting pressure on health systems.


The Loonie traded 0.47% higher for the third trading session in a row on Wednesday as rising risk appetite is boosting higher-yielding and riskier assets around the world. In 2021, the CAD is likely to continue to  be strong on the back of higher oil prices, the weaker U.S dollar across the board, as well as vaccine optimism lifting the prospects for 2021.


In the last trading session of the year, the Mexican peso was unchanged against the USD. Similar to its peers in Latin America, the country has been suffering from the spread of Covid-19, where more than a quarter of LatAm’s deaths have been registered in the country. However, the short-term prospect is favorable to the Mexican peso, with increased carry interest, higher oil prices, as well as optimism over the near-term prospect that U.S-Mexico trade relations will improve.


The Chinese yuan touched a more than 30-month high during the Asian session on Wednesday but was not able to hold the gains and closed 0.12% up against the greenback. The CNY’s gains were capped after state banks bought dollars to prevent the currency from rising too fast. In general, the CNY has jumped around 7% since June and the prospect for 2021 is an even stronger appreciation, as China is showing an impressive economic recovery.


Yesterday, the Brazilian Real rose 0.3% against the USD in the last trading session of the year, recovering some lost ground over the week. However, the BRL is by far the worst-performing emerging market currency in 2020, it has depreciated nearly 30% due to political and economic instability, along with the Covid-19 pandemic, which raised concerns over the country’s fiscal health.


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