Finally, the greenback flexed its muscles and recovered from a series of weekly losses. In a busy week ending 13th Dec, Covid news, the ECB, and Brexit talks featured predominantly in this week’s Global market news. For an in-depth economic review and fundamental analysis of G7 currencies, stay with me.
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Let’s start by looking at the fundamentals that drove the performance of the G7 fx currencies.
The Fundamentals
Coronavirus Vaccines Progress Elevated Optimism
Midweek, Food and Drugs Administration {FDA} announced that Pfizer’s covid 19 vaccines effectively fight against the deadly virus disease. On Friday, the Trump administration pressured the FDA to approve covid 19 vaccines.
Stocks and oil prices surged towards the end of the week as optimism on the covid 19 wars intensified. Countries started to roll out coronavirus vaccines driven by increased hopes for a faster economic recovery process.
Britain rolled out its vaccination exercise while the US will kickstart its inoculation campaigns soon. Canada also joined the bandwagon and on Wednesday approved Pfizer Vaccines and vaccination program to start in the third week of December.
Covid 19 Spikes Still Linger In The Global Market News
Despite the steady progress in the fight against the covid 19 spikes continued on the uprise, inflicting damage to economies and health. On Sunday, 13th Dec confirmed cases reached 72 m, deaths 1.65m, and recovered stood at 50m. Europe, Asia, Russia, and the US continue to record increased daily new cases.
Geopolitics In Action
Brexit Talks
Brexit talks significantly influenced global market news causing volatility in the forex trading market over the week. The Brexit talks generated positive sentiments fueled by deal Optimism and reversed to negative sentiments on speculations of a no-deal Brexit outcome.
Oil Prices
Crude oil reports indicate that oil prices increased fuelled by optimism in the covid 19 vaccines and hit $50 per barrel since march. As countries rolled out vaccination programs, it generated high optimism for a faster economic recovery process.
Economic Updates
On the economic front, the g7 countries released financial data overall skewed to the positive. China also posted an improved economic update. Festive economic updates favor the riskier markets over the safe-haven currencies.
Economic Review & Performance Summary Of The G7 fx Currencies
Table: g7 performance summary
| Currency pair | 7th Dec 2020 | 13th Dec 2020 | Average | Percentage change | Remarks |
| USD | 90.789 | 90.970 | 90.926 | 0.304 | increase |
| GBP/USD | 1.3376 | 1.3223 | 1.3328 | 1.61 | drop |
| EUR/USD | 1.2108 | 1.2111 | 1.2107 | 0.0743 | increase |
| USD/CHF | 0.8906 | 0.8893 | 0.8888 | 0.3139 | drop |
| USD/JPY | 104.06 | 104.01 | 104.13 | 0.12 | increase |
| USD/CAD | 1.2796 | 1.2772 | 1.2787 | 0.0626 | drop |
| AUD/USD | 0.7420 | 0.7533 | 0.7468 | 1.5092 | increase |
| NZD/USD | 0.7042 | 0.7070 | 0.7053 | 0.3549 | increase |
US Dollar Currency Rebound
Global market news shows that the American dollar recovered from a series of weekly losses supported by covid 19 spikes, poor market conditions, and economic recovery concerns. By the end of the second week of December, it rose by 0.30%, closing at 90.876. In the previous week, it had dropped by 1.07% to 90.805.
The US administration failed to deliver a coronavirus stimulus package providing much-needed support for the dollar. Job opening increased, adding more support for the dollar. However, jobless claims increased from 716k to 853k. The inflation rate remained unchanged at 1.6%, and the consumer sentiments index improved from 76.9 to 81.4.
On the international scene, Brexit talks stalemate, and the US presidential news was positive for the American dollar. Overall, the US dollar mainly recovered due to covid 19 vaccine approvals by the FDA.
GBP/USD – The Week’s Biggest Loser
As the American dollar regained strength, the sterling pound spiraled downwards as forex investors worried about economic updates, Brexit talks, and coronavirus news. The pound reversed its previous week’s gain of 0.98% and lost 1.61% to close at 1.3224 to the greenback.
Brexit talks were the primary driver in the underperformance of the sterling pound. Lack of progress in the negotiations significantly pulled down the pound. On the other hand, optimism on the Brexit talks supported the pound towards the end of the week. However, the principal negotiators Boris Johnson and Ursula von der Leyen agreed to finalize by Sunday.
On the financial front, the economic data were mixed. Manufacturing and industrial production on the upswing while GDP figures failed to impress. The UK’s economy expanded dismally by 0.4% after a previous 1.1%. Attributed to covid 19 pandemics, the UK’s GDP contracted to a 6 month lowest point.
A Glimpse At Euros to US Dollars Dismal Performance
The euros to us dollars exchange rate slipped by 0.07% to close at 1.2112. In the previous week, the euro had rallied strongly by 1.32%, closing at 1.2121. Performance of the eur was predominantly driven by covid 19 news, Brexit talks, and economic updates.
The Eurozone had mixed economic data, which did not help its currency in any way. Investor confidence and industrial production increased mainly because of optimism in the fight against coronavirus. GDP also increased by 12.5%, while the employment rate increased by 1.0%.
Progress towards covid 19 vaccines supported the euro but was not sufficient to pull it out of the red. However, it was ECB global market news that significantly pushed down the euro.
The ECB report pointed to a gloomy future for the Eurozone and responded by increasing the economic stimulus package to 500bn euros.
Swiss Franc to Dollar On The Rise
As there was no major global market news from Switzerland, the performance of the Swiss franc to dollar was mostly driven by covid 19 news and Brexit talks. Few economic data were released but had a muted impact on the Swiss franc.
The unemployment rate increased slightly from 3.2 to 3.3% Swiss franc fluctuations over the week correspond to Brexit talks updates. On Friday, sentiments turned positive on covid 19 vaccines’ progress, pushing the Swiss franc currency in the opposite direction.
The Swiss franc gained 0.3139%, closing at 0,8893 to the US dollar.
Somewhere In The Far East
Japan had a busy week on the economic diary. The Japanese yen managed to increase by 0.12% ending the week 104.04 to the US dollar. In the first week of December, it had risen by 104.17.
Household spending increased by 2.1% while its quarterly GDP expanded by 2sed2.9% to support the yen. The manufacturing sector also grew, adding more support to the yen. However, the progress towards covid 19 vaccines was damaging to the yen.
On Tuesday, Japan unveiled a $708 billion economic stimulus package to combat coronavirus pandemics and hasten the financial recovery process. Part of the funds will be channelled to carbon emission reduction and boost Digital technology usage.
USD/CAD
Canada had a quiet week on the financial calendar; thus, its currency’s performance was left to covid 19 news updates. By the end of the week, the Lonnie strengthened by 0.12%, closing at 1.2772 to the American dollar. Previously the Lonnie had increased by 1.58%.
Canada’s production index dropped from 54.5 to 52.7, pulling down the Lonnie. And as expected, the Central Bank of Canada left the monetary policy unchanged until the economic recovery is realized.
Cheerful optimism emanating from progress towards covid 19 vaccines as countries rolled out vaccination exercises uplifted the Lonnie. An additional support to this commodity-related asset came from changing fortunes in oil prices.
US dollar to Australian dollar – Week’s Top Performer
In the second week of December, the bulls took control of the Australian dollar right from the start of the week, driving it to be the week’s top performer. The Aussie strengthened by 1.45% to close at 0.7533 to the American dollar.
The bearish performance of the US dollar to Australian dollar was driven by positive economic data, US fiscal, economic stimulus debates, and progress towards covid 19 vaccines. Both the consumer and business confidence index increased, driving demand for Lonnie.
NZD/USD
The kiwi dollar managed to increase by 0.51% to close the week at 0.7084. Its performance was driven by economic data, covid 19 news, and Brexit talks. On a positive vibe, production index and retail sales increased in New Zealand.
Also, China’s improved economic condition and progress towards covid 19 vaccines provided much support to the kiwi dollar. According to investing.com, Brexit talks updates drove the performance of the kiwi dollar over the week. The uncertainty in the US stimulus plans debate work in favor of the kiwi dollar.
Conclusion
Progress in the covid 19 vaccines provided hopes for faster economic recovery and putting the virus under control. The American dollar, safe-haven king, strengthened and gained against the gbp and joy but lost against the rest. Moving forward, progress in covid 19 vaccines and Brexit talks is expected to drive the global market news.
