What’s Moving In FX This Week? Euro Vs. Dollar

For the past few weeks, anti-dollar flows have been the driving force for currencies. The sell-off in the dollar drove the euro, sterling, Swiss Franc, Australian, New Zealand, and Canadian dollars to multi-year highs. While the greenback continued to fall on Monday against most currencies, we’re also beginning to see more two-way action as investors look to take year-end profits on short dollar positions. There’s very little on the US calendar this week with the exception of inflation data. Prices are expected to rise, due in part to the higher cost of fuel, but inflation in the US is very low so an uptick will have zero bearing on Fed policy. With that said, investors could find a stronger number a good excuse for dollar short covering. Instead, we have our eye on stocks. The Dow Jones Industrial Average pulled back after climbing to record highs last week but the Nasdaq extended its gains. If stocks suffer a deeper correction, the greenback could catch a safe haven bid.

10 and one 10 us dollar bill

Image Source: Unsplash

The focus will be on Europe this week. UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen held the highest levels of Brexit talks today and unfortunately no agreement was reached. According to Ireland’s Coveney, no actual progress was made in the last 2 days. Sterling sold off sharply in response but rebounded from its lows as investors hope that a physical meeting between Johnson and von der Leyen over the next few days will yield positive results. The UK government also offered to withdraw parts of its internal market bill that counteracts the Withdrawal agreement if a trade deal is reached this week. This olive branch gave Brexit deal optimists hope. Yet, both sides have been stubbornly unwavering on 3 key issues – fishing rights, enforcement of governance of the agreement, and a level playing field so it remains unclear if a deal is really within reach. Regardless, expect some serious volatility in sterling (GBP) this week.

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