While the US presidential campaigns intensified, It was a particularly quiet week in the economic calendar for the g7 currencies. Negative currency news sunken the riskier assets ahead of this week’s presidential elections.
This weekly g7 fundamental analysis indicates coronavirus, economic data, and US politics significantly drove the forex market.
The Fundamentals
In the week ending 1st November, negative sentiments and the US elections downplayed positive fundamentals and oil prices to favour safe-haven currencies.
Negative Fundamentals
Negative sentiments towards coronavirus second wave resurgence fueled demand for safe-haven currencies amid reintroduced lockdown measures in many countries. The continued spikes in coronavirus and new lockdown measures weighed heavily on the riskier assets over the week.
Europe and the United States of America continued to record daily high new cases of the infectious disease. Many countries in Europe either implemented full or partial lockdown measures to curb the contagious virus. As of today 1st November 2020, the world’s confirmed coronavirus cases stood at 46.3m while fatalities were 1.2m.
On the political scene, studies linked Trump’s campaigns to more than 30k surge in covid 19 infections and over 700 deaths, reported by Aljazeera. However, the president team termed the findings as malicious, outrages, and misguided.
Positive Fundamentals
Positive fundamentals emanating from improved economic updates over the week supported the g7 currencies. Most countries posted positive figures suggesting improving economic status uplifting their currency. However, the economic news updates had minimal impact on the forex market over the week.
The US Elections
In the final stretch to the 3rd November US presidential elections, Biden and Trump continued to hold rallies and traversed different states amid the increasing covid 19 infections and deaths. Over 65% have already cast their votesin the early voting system, and Biden continues to lead.
Forex traders factored in the US campaign jitters in their fundamentals analysis and adopted risk aversion measures. Whatever the outcome, it will affect the US and global economy. However, investors fear that if Trump wins, he could start a trade conflict with Europe.
According to economists and strategists, the forthcoming American elections will significantly affect global financial markets.
Crude Oil Prices
Oil prices settled much lower on the week ending 1st November due to overproduction, covid 19 spikes, and reintroduction of lock down measures. According to investing.com, oil prices lost nearly 11% pulling down the commodity-related assets.
Fundamental Analysis & Economic Review Of The G7 Currencies
Table: performance summary of the g7 currencies
| Currency Pair | 26th October | 1st November | Average | Percentage change | Remarks |
| USD | 93.044 | 93,042 | 93.480 | 1.377 | increase |
| EUR/USD | 1.1808 | 1.1647 | 1.1734 | 1.7877 | drop |
| GBP/USD | 1.3023 | 1.2941 | 1.2983 | 0.7592 | drop |
| USD/CHF | 0.9074 | 0.9167 | 0.9116 | 1.3824 | increase |
| USD/JPY | 104.82 | 104.64 | 104.55 | 0.05 | drop |
| USD/CAD | 1.3207 | 1.3317 | 1.3270 | 1.4938 | increase |
| AUD/USD | 0.7122 | 0.7026 | 0.7070 | 1.5277 | drop |
| NZD/USD | 0.6678 | 0.6616 | 0.6654 | 1.1357 | drop |
American Dollar
In the economic currency news diary, the US had a busier week with key stats skewed to the positive. Continued spikes in covid 19 and the US election jitters generated negative sentiments to uplift the dollar against other currencies.
While improved 3rd quarter GDP data and reduced weekly jobless claims, released on Thursday, had minimal impact on the American dollar, a grim economic outlook proved vital for the dollar. The American economy improved by 33.1% in the third quarter reversing a 31.4% contraction in the second quarter.
Weekly jobless claims dropped from 791k to 751k. On the other hand, personal spending and inflationary pressure increased, providing more support for the dollar. As many countries recorded increased spikes in covid 19 new cases and introduced lockdown measures, the usd smiled.
In the final stretch to the US election, the uncertainties also leveraged the greenback. In the last week of October, the greenback strengthened by 1.37%reversing a previous week’s loss of 0.98%.
GBPUSD Currency News
The UK had a quiet week on the economic upfront. With no economic data, to drive the pound, ECB sentiments, coronavirus spikes, and market risk sentiments took charge. The ECB monetary policy and grim economic outlook echoed by Lagarde on Thursday weighed heavily on the sterling pound.
On Thursday, British Prime Minister Boris Johnson also introduced a 2nd national lockdown measure to curb coronavirus spread across England as confirmed cases hit 1m. In the last week of October, the sterling pound dropped by 0.71%, closing at 1.2947. Previously it had risen by 0.97%.
EUR/USD Bearish
The Eurozone had a full and busy economic calendar, but what happened to the euro? Continued spikes of covid 19 new cases in the last week of October worked strongly against the euro. Besides, new lockdown measures ensured the euro stayed in the red daily over the week.
Raising concerns over the Eurozone’s economic outlook due to the covid 19 effect, downplayed business optimism experienced in the 1st half of the week. Optimism improved in the 2nd half of the week as the employment rate dropped slightly from 6.3 to 6.2%
Dovish ECB monetary policy significantly impacted the euro. While maintaining the current monetary policy, Lagarde, the European Central Bank president, took a wait and see approach until December. He further cautioned that while GDP would likely improve in the 3rd quarter, it will be bad in the 4th quarter.
On Friday 3rd quarter GDP figures rebounded but better than an earlier projection. However, the GDP currency news had minimal impact on the performance of the eur/usd pair. Both consumer spending and inflationary pressure slumped.
By the close of the week, the euro slid by 1.80%, closing at 1.1647 to be the week’s biggest loser. It reversed the previous week’s gain of 1.21%.
USD/CHF Currency Pair News
The usd/chf currency pair opened the week at 0.9074 and increased daily, forcing the Swiss franc to shed off 1.3824, closing at 0.9167. The Swiss franc weakened due to risk aversion measures, and the US improved financial conditions. Besides, ECB’s monetary policy sentiments and grim economic projection contributed to the Swiss franc’s decline.
Coronavirus spikes across Europe and America and reintroduction of lockdown measures to curb the virus nailed the downfall of the Swiss franc. Furthermore, presidential campaigns in the US and its outcome uncertainties also pulled down the safe-haven Swiss franc.
Dollar To Japanese Yen
In the far East, the dollar to Japanese yen rate fluctuated over the week but eventually settled in the red. The yen increased dismally by 0.05% against the dollar closing at 104.66, having increased by 0.65% in the previous week.
On the economic calendar, Japan had a relatively busy week with key statistics, including retail sales, industrial production, and inflation. While inflation increased, retail sales dropped, and the consumer price index dropped by 8.7% and 0.5%, respectively.
On a positive note, industrial production went up by 4%, better than the previous increase of 1.0%. However, the economic data had little impact on the yen.
Canadian Loonie
On the economic data front, the Canadian Loonie enjoyed a relatively quiet week, but by the end of the week, it dropped by 1.49%. It closed at 1.321 to reverse the previous week’s gain of 0.49%. Oil prices and economic currency news significantly drove the performance of the Loonie.
The construction sector improved by 17% to reflect improved economic conditions. However, on Friday, GDP figures disappointed as it increased marginally by 1.2% following a previous 3.1% increase. Besides, manufacturing slid by 2.2%.
On Wednesday, the Bank of Canada released the much-awaited monetary policy report. Despite leaving monetary policy unchanged, it was not enough to uplift its currency from undue pressure. The Loonie received pressure from dropping oil prices and negative sentiments towards poor economic outlook.
Aussie Dollar The Biggest Loser
Forex traders drove the Australian dollar in a bear run over the week to slide by 1.55%, closing at 0.7028. Despite releasing positive economic currency news, it failed to support the Aussie.
Business confidence and inflation figures increased, but ultimately negative sentiments stemming from covid 19 spikes weighed heavily on the Aussie.
Nzdusd Sentiment
In the economic diary, NewZealand also had a relatively busy week. While NewZealand’s Central Bank posted positive currency news, the bears took charge of nzdusd sentiment and pushed it to the red.
Trade surplus and business figures increased, supporting the kiwi, but demand for crude oil declined, pushing it downwards. According to investing.com, the kiwi dollar slid by 1.14% to close at 0.6615 to the greenback.
Conclusion
Incredibly the US dollar emerged stronger than other g7 currencies, except the Japanese yen, over the week. Negative sentiments attributed to the US presidential uncertainty, coronavirus spikes, and reintroduced lockdown measures dominated currency news, uplifting the dollar.
Moving forward, investors are anxious about Tuesday’s presidential election outcome and its impact on the financial market. Whatever the outcome, how will the forex market react?