The euro goes higher on a calm end of the week (Daily analysis 27.11.2020)

There is little price action to report due to the Thanksgiving holidays in the United States. The US dollar remains weak, equities rally takes a breather, but indexes avoid a corrective pullback which takes place on the crude oil markets.

Although the EUR/USD pair sets new November highs at 1.1940 and trades comfortably above the 1.19 mark, the common currency advanced only 0.6% this week and was among the underperformers. The 1.16-1.20 range prevails; however, corrective turns lower are being faded at higher and higher levels – the latest one around 1.1880. It points to further euro’s gains, but the upside is limited by the ECB meeting, which brings a threat of a rate cut due to a lingering impasse on the Recovery Fund and EU budget.

The pound is sidelined as the talks drag on

The cable (the GBP/USD) still hoovers tad below 1.34, but the pound sterling was also one of the weakest G-10 currencies this week. It advanced only 0.5% against the US dollar and marginally more against the Japanese yen, the only developed market currency, which traded lower against the greenback (the US dollar). Further EU-UK negotiations will take place over the weekend as the 10-11 December EU Summits approaches. Although progress has recently evidently stalled, a no-deal scenario is still perceived as an almost impossible one. Therefore, the sterling is expected to rally significantly, but numerous market participants are eager to fade the initial bounce.

The Scandies' outperformance may come to an end

The Scandies outperformed this week, yet the Swedish krona took a hit on Thursday as the Riksbank delivered a dovish surprise. Consequently, the EUR/SEK pair rejected the 10.10 area and is unlikely to resume the rally next week. The EUR/NOK pair turned higher from the 10.50 boundary as crude oil benchmarks entered a corrective pullback due to rumours of disagreement between the OPEC+ countries. This week, the Czech koruna traded significantly stronger than the zloty and the forint as a consequence of a Polish and Hungarian unwillingness to compromise over a proposed rule-of-law condition. The South African rand and the Brazilian real traded firm as well, whereas the Turkish lira gave up a part of mid-Novembers gains.

Conotoxia research team