Risk continues to trade firm (Daily analysis 23.11.2020)

Risk assets and currencies remain supported as hopes for a fiscal deal, a trade deal, vaccine progress and better than expected Eurozone PMIs keep the US dollar offered.

The EUR/USD pair is traded a tad below 1.19. The main currency pair remains in an anaemic short term upward move; however, intraday corrections have been recently faded at higher levels. It suggests that the 1.1920 area is exposed and vulnerable. Asian and European equities trade in the green and crude oil benchmarks jump by around 2%.

Fiscal hopes, vaccine hopes, Brexit hopes

According to the US authorities, vaccination against COVID-19 may start in the United States as soon as in the first half of December. A smaller than desired, but much quicker fiscal stimulus might be introduced as the Democrats have recently become disillusioned about the chances to force through a package amounting to 2.2 trillion USD. Finally, the probability of a no-deal Brexit is declining according to Chancellor Sunak.

Those weekend headlines keep the greenback (the US currency) offered. The US dollar declines against all G-10 peers. The pound sterling outperforms as the GBP/USD pair rises by 0.75% and approaches 1.34 mark. The Scandies continue to rise, and safe havens (the Swiss franc and the Japanese yen) post only marginal gains at the beginning of a holiday-shortened trading week.

November PMIs show no signs of panic

PMIs dropped to around 6-month lows but came in better than it had been feared. Closed restaurants and hotels are an obvious drag to the services sector. The resilience of German manufacturing is noteworthy as new orders and export orders continue to recover, albeit at a stifled pace. All in all, the GDP collapse in the Q4 might be dodged as positive news on COVID -19 vaccine progress „has helped lift the spirits among German businesses, many of which are now hoping for a return to normality over the next 12 months.”

Conotoxia research team