Foreign exchange trading news indicates that Covid 19 news and economic data mainly drove the forex market in the first week of December. Amid Donald Trump’s refusal to accept defeat in the US elections, how did investors react to these fundamentals?
This weekly economic review of g7 currencies answers the question and provides more insights.
Which Fundamentals Drove The Market?
In the week ending 6th December, several fundamentals affected g7 fx currencies’ performance as indicated below.
A Tale of Covid 19 in Foreign Exchange Trading
Since the global outbreak of the coronavirus pandemics, its news – both positive and negative – has significantly affected the forex exchange market.
Regarding the negative side, the coronavirus continues unabated on the raising path. On Sunday the 6th, global confirmed cases hit 67m, and over 1.5 m have succumbed to death due to the infection while 42m patients have recovered from the disease.
Europe, Russia, and the USA have continually recorded new daily highs. According to Hopkins University, the US recorded a record new high on Saturday of 230k new cases and almost 3k deaths. In efforts to curb the spread of the disease, countries worldwide imposed containment measures.
And on the positive side, recent scientific developments may soon see the end of the deadly virus. Researchers developed vaccines and will be rolled out soon. The vaccine news generated positive sentiments around the world. And the UK is the first nation in the world to approve and order Pfizer-BioNTech vaccines.
Immediately after London decided to start rolling out the vaccine, Bahrain also approved the covid 19 drugs. Despite the continued covid 19 spikes, the recent vaccine developments outweighed the negative sentiments fuelling risk on appetite throughout the week.
Economic Updates Supported Riskier Assets
In conjunction with covid 19 vaccines progress, festive economic updates leveraged the riskier assets. Amidst the coronavirus pandemics, China’s manufacturing activities continued on the upward lane for the 9th month. The improved economies push forex traders towards a risk-on mood.
Oil Prices Rebound
In the second half of the week, oil prices rebound supported by OPEC’s production cuts and covid 19 vaccines’ progress. Oil prices hit a record 9-month high and closed at $ 46.25 per barrel, gaining 1.6% over the week.
Fundamental Analysis & Economic Review of G7 fx Currencies
Table: g7 performance summary
| currency pair | 30th Nov | 6th Dec | average | percentage change | remarks |
| USD | 91.858 | 90.694 | 91.136 | 1.206 | drop |
| GBP/USD | 1.3321 | 1.3437 | 1.3398 | 0.9238 | increase |
| EUR/USD | 1.1928 | 1.2120 | 1.2075 | 1.3208 | increase |
| USD/CHF | 0.9090 | 0.8921 | 0.8972 | 1.3273 | drop |
| USD/JPY | 104.27 | 104.14 | 104.19 | 0.04 | drop |
| USD/CAD | 1.300 | 1.2780 | 1.2898 | 1.6166 | drop |
| AUD/USD | 0.7345 | 0.7421 | 0.7398 | 0.4739 | increase |
| NZD/USD | 0.7021 | 0.7045 | 0.7054 | 0.3133 | increase |
USD Currency 3rd Consecutive Trading Week in the Red
The usd currency continued with its weekly losses series after shedding 1.19% to 90.701 in the week. Previously it had dropped 0.66%. The usd currency rate hit the lowest since 2018. Covid 19 related news and poor economic reports worked against the safe-haven usd currency.
Slowed down by coronavirus pandemics, the manufacturing sector dropped, and the nonfarm payroll failed to meet expectations. Forex market news had anticipated a 469 increase in nonfarm payrolls, but it only managed 245k.
Despite the disappointing nonfarm payroll figures, it resulted in an unemployment rate reduction from 6.9% to 6.5%. While the service sector slumped, initial jobless claims in the week eased slightly from 778k to 712k.
Increasing coronavirus new cases, and daily deaths worked against the greenback. Hopkins university’s findings indicate a staggering 200k daily new cases and 2.8 deaths each day. Several states continue to reintroduce lockdown measures in efforts to curb the infections.
The dovish federal reserve made things worse for the greenback. The Fed’s monetary policy adopted friendly rates until when the US economy picks up. Besides, continued stimulus optimism was dollar negative.
The UK approves the covid 19 drugs and plans a massive vaccination soon. A move that dampened the allure of the safe-haven currency dollar while fuelling a risk-on demand.
British Pound Currency Strengthens
The UK had a relatively quiet week on the foreign exchange trading calendar. As such, this left British pound currency performance primarily to covid 19 news and Brexit talks.
Hopes on Brexit talks significantly supported the British sterling pound. Dominic Raab, UK’s foreign secretary, said that the Brexit deal could be resolved soon, before 31st December, if negotiators show good faith, pragmatism, and goodwill.
The sterling pound currency ended the week stronger than the American dollar by 0.98%, closing at 1.3441. In the week before, the pound had risen by 0.27%.
EUR/USD Bullish
In the Eurozone, covid 19 news, economic updates, and Brexit talks gave the Euro currency direction. The eurozone economy took a beating from coronavirus’s second wave resurgence and lockdown measures.
The private sector was the hardest hit, and the service sector was not spared, either causing the Eurozone composite to plunge from 50.0 to 45.3. In renewed efforts to boost the economic recovery process, European Central Bank {ECB} expanded its bond-buying program by 500b euros.
However, progress in covid 19 vaccines outweighed the effects of the negative economic updates. At the end of the first week of December, the Euro rallied by 1.32% to 1.2121, following a prior increase of 0.89%.
USD/CHF Bearish
Economic reports and covid 19 also affected usd/chf currency pair. Coronavirus’ second wave resurgence and subsequent lockdown measures slowed economic activities in Switzerland.
According to the Swiss economic institute, KOF Economic Barometer lost 2.8 points to 103.5, indicating a subdued economy. The drop is due to several high impact forex trading indicators such as private consumption and the manufacturing sector.
At 2% below target, 3rd quarter GDP expanded by 7%. Retail sales figures increased by 2.6%. By the end of the week, the Swiss franc gained 1.3273, closing at 0.8921 to the dollar.
JPY Trend Forecast Ends in Red
Japan had a beehive of activity on the foreign exchange trading front primarily driven by retail sales and industrial production, both upbeat. Retail sales figures went up by 6.4%. However, both the manufacturing and service sectors contracted.
While the positive economic data supported the jpy trend forecast, rekindled risk appetite on foreign exchange trading market pulled down the yen. More pressure on the yen came from stimulus hopes in the US and the ongoing covid 19 vaccines optimism.
By the close of the week, the yen reduced by 0.08%e to 104.17 against the greenback. Previously the yen had dropped by 0.22%.
USD CAD News Forecast – Top Performer
Driven by covid 19 news and mixed economic data, usd cad news forecast increased in line with earlier projections. The Canadian dollar grew by 1.58% to 1.2784 following the previous week’s increase of 0.81%.
It was uplifted by a rebound in oil prices on Thursday, followed by good economic updates at the end of the week. Due to coronavirus’s second wave resurgence, the Canadian economy contracted by 5.16%.
However, trade and employment figures were favorable to Lonnie. Employment figures increased by 62.1k, reducing the unemployment rate from 8.9% to 8.5%. On the other hand, the trade deficit decreased dismally.
AUD/USD Bullish
The Aussie dollar strengthened by 0.51% to 0.7425 in the first week of December. Australia had a busy week on the foreign exchange trading diary that saw covid 19 news and economic reports drive the Australian dollar’s performance.
The manufacturing sector slowed down, and company operating profits failed, coming short of earlier projections. However, positive retail sales, 3rd quarter GDP, and trade figures supported the Aussie.
Encouragingly, the Australian economy grew by 3.3 %, and retail sales increased by 1.4%. The positive economic results are attributed to the fact that Australia, arguably, gets the coronavirus under control.
NZD/USD Near Miss
It was a quiet week in New Zealand on the foreign exchange trading calendar. Covid 19 news and economic data affected the kiwi dollar’s performance to gain 0.30% to the greenback closing at 0.7077.
On the financial front, business confidence and the construction sector improved, uplifting the kiwi. Dairy prices increased by 4.3%, throwing more weight behind the kiwi dollar.
While New Zealand’s economic updates were festive, it was covid 19 positive vibes and China’s improved economy that significantly uplifted nzd. However, end of the week, it reversed its earlier gains because risk sentiments turned negative – increased covid 19 spikes,
Conclusion
As forex traders developed an appetite for riskier assets, they drove the safe-haven currencies in a bearish run. In the first week of December, economic updates and optimism on covid 19 vaccines fundamentals primarily drove the foreign exchange trading. Relentlessly, the fundamentals kept risk appetite buoyant throughout the week.
Top foreign exchange traders now wonder – when will the coronavirus be exterminated?