USD: Equity markets are still taking a pause for breath after the US election outcome and the vaccine announcement rally. Surging cases in the US and Japan reminded the market the prospects of a tough winter ahead. While the pause in the risk assets rally is understandable (particularly if accompanied by profit taking after the strong first half of the month), the view for 2021 remains constructive (given the outcome of the US Presidential elections and the prospects of a vaccine) suggesting only a limited upside to USD. This also suggests a pause in FX gains in the short term.
CAD: BoC Deputy Governor Wilkins said the pandemic would affect potential output through its impact on investment and labour force growth, echoing the October MPR. Weaker equity markets have kept USD/CAD above 1.3000 this week, with yesterday’s breakout above 1.3099 the pair looks to be targeting 1.3178 next on the topside. Support is located at 1.3106.
EUR: With a calm day on the data front ahead and the risk rally stalling EUR/USD should remain range- bound and hover around the 1.18 level today
GBP: The resignation of PM Johnson’s chief advisor Cummings, seen by many as the mastermind behind the successful Brexit campaign and referendum, should be perceived as GBP positive, particularly in the context of the final stage of the UK-EU trade negotiations and the reported limited progress being made in recent days. This follows the resignation of Downing Street communication direction Cain on Wednesday, with both events suggesting an easing influence of Brexiteers within the PM’s inner circle. On the margin, this should swing the pendulum of probabilities towards a UK-EU trade agreement
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