Welcome to 2021. Amidst optimism towards the new year, Britain left the EU block. Lack of economic data in trading forex news left the g7 fx currencies’ performance to covid news and the US politics fundamentals. Here is what happened in the forex market in the last week of 2020.
The Fundamentals
Covid 19 News
The Covid 19 saga affected trading forex news in two ways. First, the continued distribution and developments in vaccines elicited positive vibes. And on the other hand, continued spikes and new strain elicited fears among forex traders.
In the last week of 2020, Covid 19 vaccines were distributed in many countries generating optimism of faster global economic recovery. The AstraZeneca vaccine was approved for usage in the UK and several other countries, adding more fuel to the positive sentiments.
The AstraZeneca vaccine is a game-changer in the fight against covid 19. They are safely stored at room temperature, unlike the Pfizer vaccine that has to be stored below zero temperature.
While the vaccines were distributed, coronavirus spikes continued at an alarming rate across Europe, the US, India and Russia. Global confirmed cases hit 85m on Sunday the 3rd January, while death and recovery reached 1.9m and 60m respectively.
However, it was the new strain initially recorded in the UK that generated jitters among currency traders. The new virus strain spread at an alarming rate, and since its discovery, many deaths have been recorded.
US Politics
In the week, the US President, Donald Trump signed the long-awaited $900bn coronavirus stimulus and government funding. The move boosted investor confidence in the riskier market while undermining the safe-haven assets.
The US senate shot down Trump’s proposal to increase weekly claims from $600 to $2000.
Brexit Agreement
On Thursday the UK and EU came to an agreement hours before the United Kingdom left the bloc on the 31st Dec deadline.
Oil Prices
Oil prices improved over the week and closed at $48.44 per barrel. The 0.44% increase in the week was due to positive global sentiments emanating from Astrazeneca vaccine approval and the vaccination rollout across many countries. Changes in oil prices have a bearing on commodity-related assets.
The G7 Weekly Economic Review & Performance
Table: g7 performance summary
| Currency pair | 28th December | 3rd January, 2021 | Average | Percentage change | Remarks |
| USD | 90.275 | 89.894 | 89.934 | 0.394 | decrease |
| GBP/USD | 1.3449 | 1.3661 | 1.3596 | 0.8341 | increase |
| EUR/USD | 1.2214 | 1,2134 | 1.2221 | 0.5773 | decrease |
| USD/CHF | 0.8894 | 0.8900 | 0.8858 | 0.1237 | increase |
| USD/JPY | 103.78 | 103.24 | 103.39 | 0.23 | decrease |
| USD/CAD | 1.2845 | 1.2726 | 1.2767 | 1.1112 | decrease |
| AUD/USD | 0.7577 | 0.7706 | 0.7662 | 1.4015 | increase |
| NZD/USD | 0.7098 | 0.7193 | 0.7171 | 1.000 | increase |
USD Unending Woes
The greenback reversed its previous week’s gain and closed in the red – a 5th weekly loss in 7 weeks. Driven by covid 19 news, economic data and politics the dollar plumbed by 0.32% closing the week lower just below 90. In the week before, the greenback had gained 0.27% to 90.257.
On the economic front, the US had a relatively busy week; key statistics included weekly jobless claims, manufacturing figures and goods trade data. On a positive note, the manufacturing index improved from 58.2 to 59.5. And on the last day of 2020, the weekly jobless claims dropped from 806k to 787k.
The improved economy weakened the safe-haven dollar currency. Investors also shifted away from the greenback amidst optimism of a better economic recovery in the new year. The US legislators approved the US economic recovery stimulus and funding bill in the week, adding more pressure on the dollar.
The stimulus bill ballooned the US debt and President-elect, Joe Biden promised more dovish measures, further weakening the US dollar. Covid 19 vaccine rollout and AstraZeneca approval was also harmful to the greenback. However, the threat of new strain and continued spikes in covid 19 new high records supported the dollar.
GBP USD Forex
In the UK, all was quiet on the economic front except for data from house price figures which still had no impact on gbp usd forex. Over the week, the sterling pound leaned on positive sentiments and global weakening of the dollar.
The Brexit deal news uplifted the sterling pound and both houses (commons and lords) supported the bill. Vaccines distribution across the UK outweighed negative impacts of the new virus strain; increasing coronavirus confirmed cases and the looming lockdown measures across the UK.
In the week, the UK government approved AstraZeneca vaccine usage, adding more support for the Pound. Despite starting the week on a wrong foot, the Pound recovered midweek and increased by 0.85% to 1.3672. In the previous week, the Pound had strengthened by 0.27%.
EUR/USD
It was also a quiet week in the eurozone on the financial data front. The Brexit deal and the vaccination rollout across Europe primarily drove eur usd trading forex news. The entry of AstraZeneca vaccine in the market upscaled positive global sentiments adding more support for the euro.
In the new year, economic recovery optimism uplifted the euro while scarce economic data from the eurozone did not provide any direction for the euro. The euro took advantage of the weakening dollar to gain more ground against the dollar.
The euro reversed a previous weekly loss of 0.52% and closed the week stronger by 0.18% to the American dollar.
USD/CHF
In the week ending 3rd January the Swiss franc lost 0,1237% to the usd closing at 0.8894. There were no economic updates from Switzerland hence Swiss Franc trading forex news was driven by the Brexit deal, covid 19 news and US politics.
Covid 19 new strain, first identified in the UK and the increasing confirmed cases worked against the Swiss franc. The Swiss franc found support on Astrazeneca vaccine approval and covid 19 vaccines rollout but still, not enough to uplift it out of the red zone.
USD JPY Forex
In the far east; Japan experienced a relatively quiet week on the financial calendar, with prelim industrial production figures in focus. By the end of the week, the Japanese yen strengthened by 0.22% to 103.20 against USD. Previously the yen had increased by 0.13%.
Trading forex news indicates that industrial production in japan stagnated in November after an impressive 4% increase in October. Forex traders favoured the yen amid positive global sentiments emanating from AstraZeneca vaccine approval in the UK and covid 19 vaccines rollout across several economies.
The Brexit deal also favoured the usd jpy forex. But covid 19 new strain, and global spikes in coronavirus confirmed cases pulled the yen down.
USD Vs CAD News
Canada also had a quiet week on the financial diary. There was no critical economic data from Canada; thus, Lonnie’s performance was majorly driven by positive vibes and crude oil prices. However, China’s improved economic data failed to impact the performance of the Lonnie.
Increased oil prices driven by optimism towards a faster economic recovery in the new year supported the Loonie in the week. More support came from coronavirus vaccines rollout, monetary policy, AstraZeneca vaccine approval, and the US economic recovery stimulus.
Looking at usd vs cad news, the Loonie increased by 1.06% to the usd closing at $1.2728. In the week ending 27th, the Loonie had weakened by 0.60%.
AUD/USD Weeks Top Performer
Despite a lack of economic data from Australia, the Australian dollar reversed losses from the previous week and went on a bullish run throughout the week. In the week ending 3rd January, the Australian dollar rallied by 1.17% to close at 0.7694 to the American dollar.
Lack of economic data left the performance of the Aussie dollar to market risk sentiment. Covid 19 vaccinations top gear drive across major economies fueled demand for the Aussie. Besides, more economic recovery in the US and AstraZeneca vaccine approval in the UK supported it.
Towards the end of the week commodity prices improved, providing more support for the Australian dollar. According to trading forex news, the Bloomberg commodity figures increased by 1.34% over the week.
NZD USD Forex
In New Zealand, it was quiet on the economic diary throughout the week. Despite the lack of economic data, the kiwi dollar strengthened by 1.00%.
Market risk sentiment drove the performance of nzd usd forex. The coronavirus vaccine distribution in the week and AstraZeneca vaccine approval in the UK favoured the kiwi dollar.
The Brexit deal, the US economic recovery stimulus, and global weakening of the dollar added more support.
Conclusion
Except for Swiss franc, the US dollar lost against all other currencies. The dollar’s woes in the trading forex news forced investors to seek refuge in the riskier assets.
Covid 19 vaccines rollout and Astrazeneca vaccines developments fueled optimism for faster economic recovery in the new year. However, covid 19 increase and new strain continue to hamper global economic recovery efforts.
