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Dollar remains defensive after Biden victory

Dollar remains defensive after Biden victory

GBP

UK Prime Minister Johnson held a phone conversation with EU Commission President Von der Leyen on Saturday and both agreed that there are still significant differences between both sides. Despite this, EU Chief Negotiator Barnier and his team will be in London this week for further talks and there will be strong pressure to conclude a framework deal this week as we get closer to the deadline. 

There were concerns over the UK economic outlook however this was somewhat nullified by expectations that further monetary support would underpin demand. The UK currency holds firm this morning amid solid global risk appetite and trades at 10-week highs of 1.3180 against the dollar.

 

USD

The dollar continued to lose ground ahead of the New York open as Biden edged towards an Electoral College victory.

US non-farm payrolls increased 638,000 for October after a revised gain of 672,000 the previous month, although this was slightly above consensus forecasts of around 610,000. Manufacturing job gains were held to 38,000 for the month which was below expectations, but construction jobs increased 84,000. There was solid growth in the retail sector, but government jobs fell sharply for the second successive month as census-related jobs declined again.

The unemployment rate declined to a 7-month low of 6.9% from 7.9% and below expectations of 7.6% with the household survey recording a very sharp increase in employment of 2.34mn on the month. The dollar struggled to regain ground. 

Counting in the US Presidential election continued over the weekend with networks calling the election for Biden after he secured a winning margin in Pennsylvania. There are still four states undeclared, but Biden has over 270 votes in the Electoral College. The dollar remained on the defensive on Monday and traded at 10-week lows amid strong risk appetite and negative real interest rates.

 

EUR

Germany’s exports surpassed expectations with +2.3% in September vs. +1.4% expected while the Current Account surplus expanded in the reported month.

The buying interest around Euro remains strong heading into the European open, as the advance extends into its 5th successive day this morning. As of writing, the single currency currently trades around the 1.1885, having failed to break through the 1.1900 level.

An upbeat mood in markets has opened up broad based Dollar weakness which helped push the spot price towards the 1.1900 level and reach its highest point since mid September. The Eurostoxx 50 futures and Germany’s DAX futures rally nearly 2%, suggesting a positive open on the European indices, which could further bolster the market mood and exert additional downside pressure on the safe-haven Dollar.

The focus now shifts towards the Eurozone Sentix Investors’ Confidence data and ECB President Christine Lagarde’s speech this morning for fresh impetus.

 

Data to watch

10:25 – EUR – President Lagarde Speaks 

11:35 – GBP – BOE Gov Bailey Speaks

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