The Week Ahead: Where’s The Money?

EURCAD Retreats as Budget Hits Roadblock

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The euro came under pressure after the EU’s budget ran into a stalemate. Its approval which includes the 750 billion euro Recovery Fund has turned political after Hungary and Poland rejected its tie to the rule of law.

The clause would make access to cash conditional on countries following EU standards. This will ensure a fair and transparent distribution of the vast amount of money. This debacle is likely to delay the handouts to countries desperately in need and put the expected recovery on hold.

The pair continues on its retracement under 1.56601.5320 is the immediate support level for the latest rebound.

GBPJPY Stays Put as Talks Go On

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It is without surprise that the latest Brexit negotiation has come to a standstill. The two sides have dug in and refuse to compromise over fishing rights and enforcement of trade rules.

Nevertheless, the pound only saw minor weakness as markets have already priced in the delay. What is keeping the exchange rate steady is optimism that a basic deal could be reached at the last minute. This is a diplomatic game that investors have been accustomed to over the past four years.

As the year-end approaches, the pound could be trading in a narrowing range between 133.00 and 142.00 before a catalyst propels the price action in a new direction.

USDCHF Bounces Over Protracted Stimulus

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The ebb and flow of US stimulus have stirred up short-term volatility across markets. US Treasury Secretary Steven Mnuchin has called for some emergency lending programs to expire on 31 December. This was likened to pulling the plug on the recovery. It caused risk-sensitive markets to stall in favor of the greenback.

However, it is reasonable to expect a new fiscal package as the health situation deteriorates. While markets await the government’s response, the dollar could see some limited upside.

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