Dollar continues downward slide
Tuesday 1 December, 2020
Daily Currency UpdateUSD - United States DollarDemand for the US dollar continued to lose ground to its major trading partners, making the cost of goods purchased by US consumers more expensive.EURUSD was up about 1% this morning, and the pair hasn’t traded this high since April 2018. It broke through 1.20 this morning. GBPUSD is up three quarters of a percent and over 1.34. GBPUSD hasn’t traded this high since June 2018. USDCAD has favored the Canadian dollar, and it traded at 1.295 this morning. USDCAD is down 2.74% in the past one month.What gives? Several factors have pushed demand for the US dollar down. Continued investments into the stock market take money away from USD. The ongoing COVID-19 surge has weakened consumer demand. And the transition from President Donald Trump to President-elect Joe Biden won’t be completed until January 20, 2021.
Key MoversGBP opened marginally lower yesterday after a period of intense talks between UK and EU chief negotiators ended without even a partial agreement. While most anticipate that an eleventh-hour compromise could be found, the year-end deadline is fast approaching, limiting the time needed for any deal to be ratified. While the news and gossip from the talks seemed to point towards progress being mixed, the net result throughout the day was overall optimism on a deal being reached. This combined with the news that the UK is poised to become the first western country to approve a COVID-19 vaccine, saw sterling gain briefly above the 1.34 handle against USD.The AUD opened weaker this morning amid month end rebalancing and growing Chinese diplomatic tensions. Having extended beyond 0.74 to mark highs at 0.7407 the AUD retreated overnight, dragged lower as equities gave up gains and investors looked to square positions at month end, capitalizing on the AUD’s 4.5% appreciation throughout November. The dollar came under further pressure after an inflammatory tweet posted by the Chinese Foreign ministry saw diplomatic tensions boil over again. A doctored image posted in the wake of the Brereton report findings into Australian Special Forces conduct in Afghanistan was labelled “deeply offensive” by Prime Minister Scott Morrison. The latest spat is just another example of how rapidly the relationship has deteriorated since Morrison led calls for an independent review and inquiry into the origins of COVID-19. With little hope of a near term resolution, expectations China will continue to push its agenda via trade weighed on the AUD prompting a correction to intraday lows at 0.7345.
- EUR/USD: 1.192 - 1.205 ▼
- GBP/USD: 1.331 - 1.343 ▼
- AUD/USD: 0.734 - 0.737 ▼
- USD/CAD: 1.294 - 1.300 ▼