The greenback falls ahead of Thanksgiving holidays (Daily analysis 26.11.2020)

The US dollar continues its fall from grace in the benign risk environment. Equity futures trade in the green and commodities have recent highs within a stone’s throw. The recent rally is expected to take a breather due to the Thanksgiving Holidays in the United States.

The EUR/USD pair has not only entirely recovered Monday’s slump, but also rose to new November highs. An anaemic advance towards 1.20 continues and the main currency pair trades at 1.1940. The Scandies outperform, followed by the Antipodean currencies. In the G-10 space, the Japanese yen is the only currency which fails to benefit from the US dollar weakness.

Emerging markets currencies trade firm excluding the Turkish lira, which rally comes to an abrupt end. The USD/TRY pair has jumped more than 7% over last week and since a substantial tightening delivered by the central bank.

GBP remains supported despite lack of progress

The pound sterling still awaits a EU- UK deal. The GBP/USD pair clings to its recent gains due to a broad US dollar weakness. The cable (the aforementioned pair) hovers a tad below 1.34. This week, the EUR/GBP pair has drifted marginally higher from the crucial 0.8870 area where a September low was found.

Recent headlines warn that a breakthrough is not imminent. Previous comments had suggested that the deal was to be announced on Monday or Tuesday. Instead of an announcement, we got news on a possible long implementation period. What is more, the French foreign minister and the chief EU negotiator comments point to stalling negotiations as the UK government is unwilling to yield. Consequently, the talks are set to drag on.

As long as we get a deal next week, the pound sterling should not become too jittery. For now, the EU summit, which is planned on 10-11 December looks like the last chance to strike the deal. The time is therefore limited, but European leaders have a long going reputation of being able to find common ground just in the nick of time.

Conotoxia research team