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USD slips in early trade as vaccine hopes lifts equity futures.
CAD drops under 1.30 as broader market mood dictates tone.
EUR firm near 1.19 but may struggle to extend gains significantly.
GBP tests 1.32 but Brexit talks linger as a risk.
JPY softens amid risk-on trading.
AUD, NZD rise with stock gains.
MXN leads gains among majors on stock, crude oil gains.
FX Market Update - The post-US election mood in markets remains constructive; US equities advanced strongly last week (the S&P 500 gaining more than 7%, the strongest run since April and the MSCI World Index has reached a record, according to Bloomberg). Global stocks are rising again strongly this morning with gains accelerating as we go to print on news that Pfizer’s COVID vaccine prevents 90% of infections in a study. Markets are, for now, ignoring the threat of a protracted legal fight over the presidential election results and betting that a Biden White House and a split Congress represents a market-friendly mix that can get some fiscal relief into the system fairly quickly whilst the Senate—where control still hinges on Georgia’s two January run offs—will curb Biden’s tax plans. The president-elect will unveil his coronavirus task force today which will give markets some idea perhaps of how the next administration will confront the pandemic which stands as one, significant, potential check on bullish market sentiment as infections continue to rise globally.
The USD itself is trading a little more mixed on the day—weaker against the, MXN, AUD and NZD while the JPY and CHF havens are somewhat softer; the GBP and EUR are little changed as Brexit talks run down to the wire again. The CNY traded below 6.60 for the first time since mid 2018 as US/China trade tensions are expected to ease. The DXY is trading marginally higher on the session so far and the index is perhaps starting to find some support near the base of the recent range around 92.
We think the USD is likely to soften in the longer run but we still rather feel that nearterm prospects are a little more positive and that the USD will turn high if the risk mood turns. There are no data reports at all today—the only calendar entry of note is Mester’s participation in a fintech event. Early week trade and participation may be a little sporadic ahead of Veterans’/Remembrance Day on Wednesday.
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