Treasury And Dollar Selling Go Hand-In-Hand

Brexit developments are mixed. On the one hand, Ireland's foreign minister Coveney said there was a "good chance" of striking a deal in the next few days, though it seemed mostly an expression of hope than concrete developments. On the other hand, the French warning that it could veto a trade deal seemed to warn against EC negotiator Barnier making new concessions. The French position reportedly was backed by Belgium, the Netherlands, and Denmark. It is not clear if Barnier will make a draft version available for examination, which several officials have sought.  

The euro reached almost $1.2140 late in the Asian session before a bit of selling pressure was seen in early European turnover that took it back toward $1.21. We note that the euro buying/dollar selling has been most acute in the North American session this week, and the intraday technicals appear to be bottoming. Another attempt higher today cannot be ruled out. Although we thought ahead of next week's ECB meeting, the deflationary forces that are still evident, and the growth divergence here in Q4 favoring the US that the euro would not sustain a break of its four-month trading range. However, we recognized a convincing break could spur a two-cent move. Sterling is firm, and for the third consecutive session, is flirting with the $1.34 area. It peaked over the past two sessions near $1.3440 but could not sustain a foothold above $1.34. It recovered from below $1.33 yesterday, the week's low, to reach $1.3420 today. The intraday momentum readings are stretched. Meanwhile, the euro is seeing its recent strong gains against sterling pared. It had reached almost GBP0.9085 and has fallen back to almost GBP0.9020 today. Below there, support is seen near GBP0.9000.  


The possibility of a last-minute stimulus deal has improved after the Democratic leadership (Biden, Pelosi, and Schumer) backed the bipartisan proposal for a $908 bln package. It is the first significant retreat from the $2.4 trillion effort, though reports suggest they had unveiled a $1.3 trillion package this week. The bipartisan proposal includes $180 bln for a $300-a-week, extended unemployment insurance, $300 bln for a new Payroll Protection Program (loans that can turn into grants), and $240 bln for state and local governments. Biden suggested that while the bipartisan proposal was not the answer, it did offer immediate assistance.  

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Read more by Marc on his site Marc to Market.

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