Dollar down with unknown outcome
Thursday 5 November, 2020
Daily Currency UpdateDemand for the US dollar has fallen steadily over the last several days after reaching one-month highs late last week. The time it has taken to identify the winner of the 2020 US Presidential election has increased demand for other currencies.
There are five states that have yet to finalize their vote counts. Georgia and Pennsylvania are expected to announce more votes this morning. Nevada and Arizona are expected to announce more votes this afternoon. North Carolina counts mail ballots postmarked by Election Day until November 12.
Markets are expected to benefit from the outcome. Should former Vice President Joe Biden win, his agenda would be tempered by a Senate once again headed by the Republicans. Equity markets gained value, and investors were willing to expand their investments into other countries and currencies.
In the middle of all this, the Federal Reserve is scheduled to release one its eight Interest Rate Statements.
Key MoversThe Bank of England announced that it will be pumping £150 billion more into its bond buying program in the latest twist to its quantitative easing program. Sterling didn’t react to the news in the way some may have anticipated, strengthening by almost a whole cent versus the US dollar this morning. However, it’s clear that a dismissal by the BoE to send interest rates into negative territory for the first time in history has been perceived by the market as positive for the pound.
Yesterday saw weaker than expected PMI data for the UK, underscoring the effects of strained Brexit negotiations and COVID-19 on the manufacturing and services sectors. The probability of a no-deal Brexit is still a very real one while the impact of the latest country wide lockdown will only be felt in weeks to come.
The Australian dollar traversed a broad trading band throughout Wednesday, fluctuating as markets reacted to the ever-evolving US Presidential Race. The AUD enjoyed strong gains early extending through 0.7150 and 0.72 to touch three weeks highs at 0.7215 as investors looked to front run the election and price in a Biden win. With results filtering through, the race was evidently much closer than the polls had suggested and an early Trump win in Florida saw markets rush to unwind risk gains, forcing the AUD back toward the bottom end of recent ranges and lows at 0.7050. The AUD then began recovering losses overnight as again Biden and the Democrats seemingly built the clearest path to victory. Pushing back toward resistance at 0.72 the AUD currently buys 0.7172 US cents at the time of writing.
- EUR/USD: 1.171 - 1.185 ▼
- GBP/USD: 1.294 - 1.310 ▼
- AUD/USD: 0.714 - 0.727 ▼
- USD/CAD: 1.303 - 1.317 ▼