Monex: EUR/USD kan hoger klimmen door verzwakking dollar

Monex: EUR/USD kan hoger klimmen door verzwakking dollar

Currency
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Hieronder volgt een kort commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.

EUR
The euro sits in the green again this morning, but questions remain over how long it will last after yesterday’s rally was sharply reversed in the afternoon session and resulted in EURUSD posting losses on the day. Broad USD weakness is the theme in currency markets again today, which is helping the single currency retrace yesterday’s losses and attempt to return to its three-month high. This comes as Euro-area finance ministers agreed to overhaul the region's bailout fund, the early introduction of the European Stability Mechanism as a backstop to the Single Resolution Fund, and allowing the fund to have a greater say in the design and execution of future bailouts. Today’s euro rally faces a substantial hurdle, however, as EU members ratchet up pressure on the leaders of Poland and Hungary to pass the EU’s economic recovery package, with the legislation also including the bloc’s seven-year budget. All 27 member states need to approve the legislation to allow the bloc’s executive arm to raise debt in capital markets to finance the package, with the deadline for achieving approval by Poland and Hungary set on Wednesday by German Chancellor Merkel. If the Wednesday deadline is not met, the matter will have to be taken up by the leaders themselves over a summit planned for December 10th. 
   
USD
Currency markets saw their usual spot of end-of-month volatility yesterday, with the dollar strengthening in the late afternoon before paring back some or all of its gains against many major currencies. Federal Reserve Chair Jerome Powell will testify to the Senate Banking Committee today, although his remarks have already been released. Powell will reiterate that the Fed remains “committed to using our full range of tools” to help the economic recovery, but there were no specific hints about new easing measures. Powell will also warn that the recent surge in Covid-19 cases will create “challenging” conditions for the near future, while vaccine developments have improved the medium-term outlook. On this topic, Moderna said that it would seek emergency approval to begin distributing its Covid-19 vaccine in the US and Europe after trial data showed it was sufficiently effective. Yesterday’s data included a 1.1% contraction in pending home sales in October, defying expectations for an improvement, and suggesting that perhaps the housing market was cooling after several months of expansion fuelled by loose monetary policy.  
   
GBP
Sterling is trading higher this morning, amid mixed Brexit news flow and new evidence of a frothy housing market. Data released yesterday showed that mortgage approvals surged to their highest level since 2007, with 97,500 mortgages approved in October. This is a 33% increase on February’s approvals and was almost certainly driven by a rush to buy before the Government’s temporary cut in stamp duty expires. With the tax cut expiring in March and unemployment likely to have increased significantly by then, the outlook for 2021 is far less certain. The Government published a cost-benefit analysis of its latest coronavirus lockdown measures, ahead of a vote in Parliament on them today. However, some backbench members of the Conservative party appeared to be unconvinced. Mark Harper said the analysis was “collapsing under the glare of scrutiny”, while the Financial Times is reporting that “dozens” of backbenchers are “furious” about the measures. However, leader of the opposition Keir Starmer said that the Labour party would abstain from voting, meaning the measure would likely pass. Brexit news flow has been somewhat encouraging, with several European politicians expressing positive sentiment about the prospects of a trade deal in the near future. French European Affairs Minister Clement Beaune expressed hopes for an agreement “in the next few days”. Dominic Raab, UK Foreign Secretary, said that he thought “there’s a deal to be done” if the EU showed “pragmatism” and “good will”.