XE Market Analysis: Asia - Dec 11, 2020

The Dollar bounced modestly in overnight trade, and for the most part, held those gains through the N.Y. session on Friday. Ranges remained relatively narrow, however, into the weekend. The DXY moved from 90.62 in London morning trade, later topping at 92.04 into the open. Incoming data saw core November PPI a bit on the cooler side of expectations, while the preliminary University of Michigan consumer sentiment report printed better than consensus. Wall Street was choppy inside of relatively narrow ranges. Sentiment was dented by the lack of a Brexit deal and the inability of Washington to enact another round of stimulus. Profit taking was also a featuring given lofty valuations following the torrid gains on Wall Street of late. Disappointment over stimulus and Brexit has overshadowed news that the FDA will grant emergency use authorization to the BioNTech/Pfizer vaccine.

[EUR, USD]
EUR-USD touched one-week highs of 1.2162 in early London, since falling back to 1.2107 in late N.Y. morning trade. Risk-off conditions weighed ahead of the open, and the pairing stayed down through the morning. The increased odds for a no-deal Brexit has likely impacted EUR-USD to a degree on Friday, though not to the extent Sterling has been moved. EUR-USD losses were likely limited by strong gains in EUR-GBP, which hit near three-month highs in early N.Y.

[USD, JPY]
USD-JPY fell from opening highs of 104.15 to six-session lows of 103.82, since recovering slightly to just under 104.00. Yen strength has been a theme on Friday, seeing the JPY crosses move lower, as risk-off has resulted in safe-haven Yen buying step in. USD-JPY has been held to a trading range of a little over 100 points for the better part of a month now, with the save-haven currencies both tending to move in the same direction, regardless of the risk backdrop.

[GBP, USD]
Cable recovered some lost ground into the London close, where short covering was a feature ahead of the weekend, when the outcome of Brexit may or may not be decided. The UK government hasn't folded to EU demands, and has strongly signaled that it is prepared to leave its transitory membership of the EU's common market and customs at year end without a deal. U.K. ministers had been preparing the country for no-deal, arguing that the country would pay a higher price for a poor deal "in the longer run" than with a no-deal scenario. Overall, it sounds like the UK government is serious about a no-deal. Leaders have set a deadline of Sunday, though discussions could extend through next week if a deal has been agreed by the end of the weekend.

[USD, CHF]
EUR-CHF recovered from one-moth lows of 107.43 in N.Y. on Thursday, peaking at 107.86. Today marked the fifth-straight session of lower daily lows. Positive Covid vaccine news, along with the formal start of the transition to a Biden presidency, turned sentiment higher last week, largely keeping the cross over the 1.08 level. EUR-CHF had struggled to hold the level since the summer, and will likely remain altitude limited going forward unless the risk-backdrop holds up. In addition, the cross will remain under pressure should the ECB embark on further easing in December.

[USD, CAD]
USD-CAD recovered to 1.2793 in early North American trade, after printing 32-month lows of 1.2708 on Thursday. The combination of a generally firmer USD, WTI crude prices off of Thursday's trend highs, overall risk-off conditions, and pre-weekend USD-CAD short covering have all been behind the pairing's move higher. Thursday's 1.2830 high now marks resistance, with support at Thursday's trend low of 1.2708.