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Dollar losses strength to start week

USD - United States Dollar

Demand for the US dollar was down this morning after a week in which it gained value against many of its trading partners.

This morning, low demand for the dollar pushed EURUSD up a half a percent, GBPUSD up nearly two-thirds of a percent and USDCAD down a third of percent. Outside of comments from Federal Reserve Chairman Jerome Powell’s presence on a virtual panel discussion, there is little macro-economic indicators shifting the markets.

China announced that its GDP grew by 4.9% in the third quarter, year-on-year. Few other countries are expected to meet GDP growth expectations this year.

Key Movers

Last week we saw another Brexit deadline pass with no real concessions from the EU or the UK and certainly no agreement reached. However, President of the European Commission Ursula Gertrud von der Leyen stated that the EU negotiating team will return to London at the start of the week to continue negotiations with the UK. Prime Minister Boris Johnson isn’t so optimistic. He confirmed that unless the EU returns to London with further concessions there is no point in continuing. There ultimately needs to be a fundamental change in both parties’ stances if we are to reach a deal before the end of the year.

Given the rising cases of Covid-19 throughout the UK, but in particular the North-West and now London, the increased lockdown measures with the tiered system in place and the lack of progress with Brexit talks, it’s a massive surprise at how well GBP is performing. GBPEUR is trading comfortably above the 1.10 handle and GBPUSD heading towards the 1.30 handle.

The Australian dollar slid further down, coming off a one week high of 0.7231 against the USD to open at 0.7078 this morning. The AUD took a beating in the last week as employment figures came out showing unemployment figures of 29.5k jobs lost in September. While this did beat forecasted figures of 35k, comments from the RBA indicated that interest rates would be cut down to 0.10% from the current record low of 0.25%. Coupled with strong US retail data released late Friday night, the AUD looks vulnerable for further sell offs and risk sentiment remains weak. In the future, we can expect some major movements on Tuesday as the RBA will release their monetary policy meetings. Showing a detailed record of the RBA’s most recent meeting, it can provide in-depth insights into the economic conditions that influenced their decision on where to set interest rates and indicate if a rate cut is likely in the future.

Expected Ranges

EUR/USD: 1.170 - 1.179 ▼

GBP/USD: 1.289 - 1.301 ▼

AUD/USD: 0.707 - 0.7113 ▲

USD/CAD: 1.315 - 1.319 ▼