News & Analysis
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After climbing for four days on the bounce, the pound is struggling to hold its recent highs this morning as the market’s appetite for risk starts to unwind. The announcements that major economies will continue to tighten lockdown measures, albeit in a localised manner for now, continues to weigh on risk appetite as downside risks to the global economic recovery start to materialise.
EURPLN popped upwards today as the zloty weakened following an article by National Bank of Poland Monetary Policy Council member Eryk Lon, who wrote that Poland could move into negative rates if consumer sentiment worsens.
It’s been an indecisive week for G10 FX, with the major pairs remaining within recent trading ranges as hopes for US fiscal stimulus faded and several regions continued to report worsening Covid-19 pandemics. Sterling will be in focus next week, with plenty of MPC member speeches and labour market data scheduled ahead of Thursday’s potentially fateful EU summit.
The euro is trading slightly softer this morning against the majority of the G10 basket after rallying to a two-week high against the US dollar during Friday’s late session. With today being a light day on the eurozone data front, all focus turns to the various ECB speeches throughout the day, with ECB President Christine Lagarde speaking at IMF at 12:00 BST.
In September, Canada’s economy added 378,200 jobs compared with 245,800 in August, bringing the unemployment rate down from 10.2% to 9.0%. Much of the gains were a by-product of loosening containment policies in Canada as the survey was conducted between the 13th and 19th of September. However, this isn’t to last.
The narrative over fiscal stimulus seemingly supports the Democrats prior to the election, with fiscal stimulus needed to help the recovery along the way while Pelosi’s $2.2trn stimulus bill remains on the table awaiting Senate approval.
From August to September, CZK had weakened over 4.5% against the euro, while the Polish zloty fell by almost 5% against the euro and the Hungarian forint even saw a 6.5% decrease vs the euro. However, since yesterday the Czech Republic has become the EU’s worst hotspot with the most cases per capita over the last two weeks.
Pressure on the euro rises as the eurozone continues to struggle with accelerating new daily infections, which is shown by the euro’s limited spot return against the US dollar compared to other G10 currencies. France will impose more restrictions today after the seven-day rolling average reached a record, while Spain also reported a record of 5,075 cases yesterday.
The news that further fiscal stimulus measures won’t be enacted prior to the November election ring through markets today, shortly after Fed chair Powell reiterated the need for active fiscal policy in response to this crisis yesterday.
The dollar has remained well on the back foot this morning after Donald Trump was discharged from hospital following admission for Covid-19. House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin spoke on the phone yesterday for about one hour, discussing potential further fiscal stimulus.