SMATS FX Weekly Market Report | Monday 14 December 2020

USD

The US Dollar is in the red again with a slight positive lean in risk sentiment with the COVID-19 vaccine approvals spurring on global risk trends. This week the US Dollar is set to bounce around with the Federal Reserve set to make their interest rate decision on Wednesday, no change is expected but we should keep our eyes out for the economic projections and the press conference that follows for any updates on the stimulus package. On Wednesday afternoon the retail sales are expected to fall by 0.3% for November but risk sentiment should be the biggest driver this week as we see the roll out of the COVID-19 vaccine in the major economies worldwide.

Influences on HKD, SGD & AED

In a week without many data releases for our exotic currencies, risk sentiment is expected to drive the rates. Singapore will be releasing their unemployment rate for the 3^rd quarter, its expected to check in at 3.6%, up from 2.8% last quarter. On Thursday, Hong Kong expect their unemployment to tick higher from 6.4% to 6.5%. USD news is expected to keep the exotic currencies on their toes and any news that could impact emerging market currencies.

AUD

Risk appetite and better-than-expected domestic data drove the AUD higher last week as the COVID-19 vaccine approvals boost global optimism. This week Australia will be releasing their labour market numbers, we expect no change to the unemployment rate after it rose to 7.0% in October. The AUD is expected to be unmoved by this event as the result should not impact the Reserve Bank of Australia’s policy plans. China will be releasing a load of data this week, their fixed asset investment, industrial production, retail sales and unemployment rate is all expected to tick higher showing some signs of improvement. With increased tensions on the Chinese-Australian trade spat should push the AUD lower while positive developments can lead to AUD strength.

NZD

The NZD ended as a net winner last week in what was a subdued week with just Brexit developments and COVID vaccines driving the rate, so it was likely counter-currency action that drove the Kiwi Dollar higher. This week New Zealand will be releasing their GDP results for the 3^rd quarter, after officially entering a recession in the 2^nd quarter, analysts expect a jump of 15.1% in the 3^rd quarter. Business confidence should climb to 7.4 in December from the -6.9 in November when ANZ release the data on Friday.

EUR

Economic updates surprisingly came out better than expected last week but all the Brexit drama has traders tiptoeing around the Euro ahead of the finale this weekend. PMI readings out of Europe is expected to drive the Euro with Brexit developments. French PMI’s are expected to climb while Germany and the Eurozone’s figures are expected to slide. Germany’s Ifo business climate index should also fall on Thursday from 90.7 to 90.2. Risk off flows should see the Euro climb higher while increased focus on the distribution of the COVID-19 vaccine would be positive for risk sentiment.

GBP

The British Pound ended up as the biggest loser last week as a no-deal Brexit looks increasingly likely and the Bank of England’s financial stability pushed the GBP down further. Medium tier UK data is expected to take the back seat to Brexit talks and the Bank of England’s policy decision. On Thursday, no changes are expected to the interest rates and the asset purchases should remain unchanged, contingency plans are expected to be announce in the event of a no-deal Brexit.