Most Asian currencies were rangebound against a weaker dollar on Monday morning with several regional central banks taking steps to counter appreciation against the greenback (US Dollar), while stocks climbed on hopes of a vaccine-led economy recovery.
With the dollar languishing near a 2-1/2-year low against a basket of global currencies, both China’s yuan and the Indian rupee gained ground in the face of official moves to cap appreciation.
The yuan firmed around 0.1%, even after a decision by the central bank to lower a parameter on cross-border financing, widely seen as an official attempt to slow the pace of the currency rally.
Singapore stocks jumped 1.3%, with market participants looking ahead to Prime Minister Lee Hsien Loong’s national address on the COVID-19 situation in the city-state later in the day.
The dollar was down on Monday morning in Asia, with the U.S. Federal Reserve expected to increase purchases of longer-dated Treasuries to contain a rise in yields when it hands down its policy later in the week.
The U.S. Dollar Index Futures that tracks the greenback against a basket of other currencies edged down 0.17% to 90.773 by 9:48 PM ET (1:48 AM GMT) this morning.
The dollar index contract rolled over to the Mar. 21 contract on Dec. 13.
The dollar is also under pressure with investors expectant that the Fed will keep interest rates low for an extended period at its last policy meeting of 2020.
Investors had been retreating from the dollar as hopes for a global economic recovery from COVID-19 grew over positive vaccine news and hopes for the latest U.S. stimulus measures increasing investors’ risk appetite.
The AUD/USD pair inched up 0.06% to 0.7538. The AUD was up against the dollar ahead of the release of the Reserve Bank of Australia ‘s minutes from its latest policy meeting, due on Tuesday. Investors are widely expected to scale back bets for additional monetary policies following the minutes’ release.
The NZD/USD pair was up 0.30% to 0.7091, ahead of a slew of economic data, including GDP, due later in the week.
The GBP/USD pair rose over 1% to 1.34, seeing its biggest one-day gain since Dec. 1 over increased hopes that the U.K. and the European Union (EU) would reach a Brexit trade deal. Hopes were raided after both parties agreed to extend talks beyond a Sunday deadline set by both parties during the previous week.
Stocks started off the week on a bullish note as investors took comfort from further stimulus bill negotiations and the impending deployment of the first vaccine in the U.S.
S&P 500 futures gained about 0.6%, with the first deliveries of the Pfizer Inc.-BioNTech SE vaccine in the U.S. due to arrive Monday morning. A bipartisan group of lawmakers is set to unveil a $908 billion pandemic relief bill the same day, although there is “no guarantee” Congress will pass it, a key negotiator said.
Global equities are looking to rebound from their first week of losses in six, even as hurdles remain for a U.S. stimulus deal and the coronavirus continues to spread. New York is stopping indoor dining on Monday, while Germany will go into a hard lockdown on Wednesday. Still, the head of the U.S. government’s vaccination drive said as much as 80% of the population could be given the shot by next summer, putting “herd immunity” within reach.
Brexit Negotiators for both sides will “go the extra mile” in coming days to try to reach an agreement before the end-of-the-year deadline to avert a chaotic divorce between the U.K. and the EU, despite missing the latest deadline.
The U.K. has been in a transition period since it formally left the EU in January, during which rules on trade, travel and business remained unchanged as the country remained in the EU single market and customs union. However, should both sides fail to reach an agreement before the end of the month, around $1 trillion in annual trade from tariffs and quotas, businesses on both sides would be left unprotected and at risk.
Some investors said that the pound is more vulnerable to selling than the euro, warning that the pound’s rally is not likely to last. Both sides have yet to narrow their differences on a variety of issues, including fishing rights, and the risk that they will not reach a deal before the deadline remains.
On Tuesday, the ECB supervisory board will meet. However, its decision may still be announced because it will need to be signed off by the ECB’s governing council under the so-called non-objection procedure. However, officials said the institutions shared many members and were in close co-ordination so their decisions were unlikely to differ.
Overview for the Week Ahead
Here are some key events coming up:
Tuesday brings China industrial production and retail sales data for November.
The Federal Reserve meets Tuesday and Wednesday, with markets widely expecting fresh guidance on its continued asset purchases.
Policy decisions from the Bank of England and central banks in Mexico, Switzerland and Indonesia are due Thursday. Japan and Russia announce decisions Friday.
All these events and more have the potential to influence the markets which means there is plenty of trading opportunities.
Today’s High Impact Events
The times below are GMT+2.
There are no high impact events today but there are low impact events from Europe, Japan and New Zealand.
21.30 – Canada BOC Macklem Speaks
Potential instruments to Trade: CAD Crosses.
There are low impact events from China, UK, Europe, U.S., New Zealand and Australia.
10.15 – French Flash Services & Manufacturing PMI
Potential instruments to Trade: EUR Crosses.
11.00 – Flash Services & Manufacturing PMI
Potential instruments to Trade: EUR Crosses.
11.30 – U.K. Flash Services & Manufacturing PMI
Potential instruments to Trade: GBP Crosses.
ALL-Day – OPEC – JMMC Meetings
Potential instruments to Trade: All Crosses Potentially.
15.30 – Canada CPI m/m
Potential instruments to Trade: CAD Crosses.
15.30 – U.S. Core Retails Sales & Retail Sales m/m
Potential instruments to Trade: USD Crosses.
16.45 – U.S. Flash Manufacturing & Flash Services PMI
If you have any questions or require any assistance, please contact one of our support team members via our Live Chat or email [email protected].
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