News & analysis


The loonie’s rally has seemingly stalled over the last few trading sessions after reaching a fresh two and a half year high on Thursday last week. The US dollar has continued to sell-off, although less dramatically than in previous weeks, suggesting a level of resistance remains in the way of the loonie rally. Optimism over fiscal stimulus returns for the US dollar and has resulted in the greenback trading marginally higher this morning after selling off overnight, which could keep the loonie pinned near recent highs for another trading session. This evening at 19:30 GMT, Bank of Canada Governor Tiff Macklem is set to speak at the Greater Vancouver Board of Trade, which will mark the last piece of communique from the central bank for this year. Following other Governing Council member Beaudry’s speech last week, focus will be on Macklem as it was announced that the central bank is investigating the viability of the effective lower bound being lower than 0.25%, while the speed in which the average maturity of bond purchases is also in focus after the rate statement outlined appetite for a flatter yield curve. For currency markets, it is unlikely that Macklem’s speech will produce many fireworks, however, the risk of the Governor talking down the loonie remains a risk going into the event.


The dollar found a stronger footing in the afternoon of yesterday’s session as optimism rose around a bipartisan fiscal stimulus package and electoral clarity, however, it traded mixed against the euro overnight and is yet to show a definitive trend against the G10 this morning. Headlines suggested that House Speaker Nancy Pelosi told Treasury Secretary Steven Mnuchin the remaining open items on the spending bill could be easily resolved, giving markets hope that a deal can be reached soon, with the core $748bn spending package likely to pass if it finds endorsement from Senate leaders. The smaller $748bn package excludes liability protections and state aid, which have proven to be key stumbling blocks in negotiations. At the same time, negotiations are still ongoing about the full $908bn package. The focus remained on developments in Washington as the Electoral College confirmed Joe Biden’s victory on Monday, closing a tumultuous period sparked by Donald Trump claiming fraud in the vote-counting. Congress will officially count the electoral votes on January 6. Meanwhile, the US joins the eurozone with a concerning uptick in virus numbers. New York  is heading toward a second full shutdown if the cases and hospitalisations continue at their current pace, according to Governor Andrew Cuomo. Later today at 14:15 GMT, focus turns to the US industrial production figure which may induce some volatility for the dollar, however, the greenback is likely to take its cue from broader developments in risk sentiment and headlines around the fiscal stimulus deal.


The euro started the morning on the back foot after Dutch Prime Minister Mark Rutte announced that the Netherlands will follow in Germany’s footsteps and enter a 5-week hard lockdown as of today. France is considering slowing down the reopening process despite having enjoyed a downtick in infections over the last few weeks, as the case count has been higher again in the last couple of days. Italy’s Prime Minister Giuseppe Conte stated it is “necessary to adopt further restrictions for the holiday season to avoid a third wave of contagion”. These developments may weigh on the euro in the short term, evidenced by today’s softer price action in EURUSD. Looking at the bigger picture however, EURUSD still is trading over 4.50 percentage points higher compared to the beginning of November, despite the resurgence in virus cases, a dovish European Central Bank and renewed lockdown measures across the bloc. As today is a light day on the eurozone calendar, focus continues to be on further developments in risk sentiment.


Sterling has pared back some of its early gains from yesterday, after the Government announced a new tightening in coronavirus restrictions yesterday. The capital London will enter the highest tier of Covid-19 restrictions following an exponential rise in cases ahead of a planned loosening of rules regarding gatherings over the Christmas period. The renewed lockdown will hit hospitality businesses and jobs the hardest, many of which have already been profoundly affected this year. When announcing the new measures Health Secretary Matt Hancock also said that a new, possibly more virulent variant of the virus had been identified. This morning also saw the release of labour market data from October, which showed a smaller than expected 143K decline in the Labour Force Survey measure of employment. Economists surveyed by Bloomberg had expected a more substantial 250k decline, and the release is consistent with generally surprising reliance in the UK labour market so far this year. The latest lockdown measures mean that things will likely get worse from here, however.



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