Daily Currency Update

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Long slog for covid recovery

USD - United States Dollar

COVID-19 cases and related deaths continued an upward trajectory in the US, dampening demand for the US dollar.

More than 163,000 new cases were reported yesterday, an increase of 72% on the two-week average. And new deaths were up 33% in the same time frame. Equity markets, which responded with enthusiasm on the week’s vaccine news, have been relatively flat since.

The US Dollar Index, which measures a basket of currencies against the dollar, opened below 93 for the second day in a row.

In addition, the ongoing saga of President Donald Trump’s transition to President-elect Joe Biden raised hopes for improved international trade and caused doubt on a sensible handoff.

Key Movers

The euro outperformed yesterday, extending back beyond 1.18 despite a contraction in industrial production. A broader risk asset sell-off appears to have helped the single currency as investors chased the world’s most liquid currency pair.

The Great British pound was the day's worst performer down almost 1% following a weak Q3 GDP print. While data was largely in line with expectations the UK economy has been devastated by COVID-19 and is still some 10% softer than before the pandemic. With new nationwide restrictions now in play as daily case numbers grow at an exponential rate there is little hope for a Q4 recovery. Sterling holds onto gains above 1.30 and currently buys 1.3118.

Having failed to break above 0.73, the AUD drifted lower through trade on Thursday as market demand for risk soured amid what seems to be profit taking and general investor caution. Having tested a break above resistance at 0.7290 earlier this week the AUD struggled to maintain momentum, dragged down by a broader risk asset sell off. Markets seemed keen to capitalize on recent gains, taking profit having amended near term economic expectations. While a successful COVID-19 immunization program will ultimately allow the global economy to rebuild, logistical and distribution challenges mean broad cross-sections of the community are unlikely to gain access a COVID-19 vaccine until late 2021, meaning short term challenges remain in play.

Expected Ranges

EUR/USD: 1.18 - 1.183 ▼

GBP/USD: 1.310 - 1.318 ▼

AUD/USD: 0.722 - 0.726 ▼

USD/CAD: 1.311 - 1.316 ▲