EUR / USD
The German ZEW economic sentiment index declined to 39.0 for November from 56.1 the previous month and below consensus forecasts of 41.8 while the current conditions index edged weaker to -64.5 from -59.5 in October. The wider Euro-zone sentiment index dipped to 32.8 for November from 52.3 the previous month.
The Euro was unable to make any impression and dipped to lows below 1.1780 amid short-term unease over Euro-zone developments.
The US NFIB small-business confidence index was unchanged at 104.0 for October and above consensus forecasts of 102.2.
The JOLTS recorded a small increase in job-openings to 6.44mn from 6.35mn the previous month, but slightly below consensus forecasts. Elsewhere, the IBD consumer confidence index declined to 50.0 for November from 55.2 previously. Data had little impact given the focus on coronavirus developments.
After the New York open, the European Parliament and EU governments reached a deal on the 2021-2027 budgets which included the EUR750bn recovery package. The agreement boosted confidence in the Euro-zone 2021 recovery outlook which also cushioned the Euro.
Boston Fed Governor Rosengren stated that more fiscal and monetary stimulus is appropriate and that it was crucial to provide support for small companies.
US yields edged lower after the Wall Street open which also limited fresh dollar support, although there was a limited correction in commodity currencies which helped protect the US currency. Overall, the single currency recovered some ground following the EU budget approval, although there was a lack of momentum and overall yield spreads were still a significant element supporting the dollar. The Euro settled around 1.1825 in early Europe on Wednesday as commodity currencies advanced.
Global risk appetite held firm on Tuesday which limited the potential for yen support. US yields, however, moved slightly lower which limited the potential for further sustained US currency support and overall market volatility eased as traders considered the potential vaccine implications.
Markets continued to monitor US political developments as President Trump’s legal team continued to challenge the results in a few battleground states. Markets will monitor speculation surrounding Biden’s key appointments with a particular focus on the Treasury Secretary given the global implications.
Although there was further optimism surrounding medium-term vaccine developments, there were important concerns over the near-term outlook. US hospital admissions have surpassed their April peak and several states were looking to impose fresh restrictions on activity. US equity markets were unable to make headway, although future edged higher on Wednesday while the Chinese yuan held firm. Overall, the dollar edged higher to near 105.30 in early Europe.
The UK jobs data reinforced unease over labour-market trends, especially a sharp increase in redundancies. An extension of the furlough scheme provided an element of relief and Sterling was also protected by optimism that vaccine developments would help provide a key lifeline for the economy.
Bank of England Chief Economist Haldane stated that a vaccine could be transformational and also pointed out that there was no point in providing extremely strong policy support if communication stokes fearfulness. Vaccine hopes dampened talks of potential negative interest rates.
There were no substantive developments on Brexit trade talks during the day with markets optimistic that progress towards a deal would be made this week.
Global risk appetite held firm which helped protect the UK currency, especially with hopes that vaccine developments wold provide important relief to the services sector next year. Sterling strengthened to 9-week highs above 1.3250 against the dollar and the Euro retreated to 2-month lows below the 0.8900 level before a correction.
The latest UK GDP data will be released on Thursday with the potential for a strong rebound in the third quarter offset by underlying concerns over the fourth-quarter relapse. Sterling held firm on Wednesday with robust risk appetite still an important element in providing support as it traded near 1.3270 against the dollar.
The Swiss franc edged lower on Tuesday as the robust tone in global risk appetite helped limited demand for the Swiss currency, especially with an increased element of optimism over the 2021 global recovery outlook. The EU recovery fund approval also dampened support for the franc.
The Euro edged above the 1.0800 level, although overall gains were still limited while the dollar advanced to the 0.9175 area before settling around 0.9150. Precious metals stabilised which limited the potential for franc selling with the Euro just above 1.0800 on Wednesday while the dollar was held just below 0.9150.