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Scan of the Forex market
If you are looking for high volatility, there continues to be no better place than the Sterling. In the last 24h, the currency shot up amid the endless twists and turns in Brexit negotiations. December 31st is the deadline but an extension beyond that date can not be fully ruled out either. I really hope I am wrong and we see a Brexit resolution this month.
Be mindful that if we head into year-end with the outcome being a 50/50 show, the volatility we’ve seen in the Pound may look paltry compared to what’s to come as liquidity dissipates. By then, many investors would be away from their desks with market making algos deployed much more sparsely given the low liquid conditions. As usual, one must adapt to the new developments but it definitely looks like we are headed down to the wire for a deal or no deal and therefore risk to hold GBP exposure over the Christmas period is very high.
When it comes to the US Dollar, with the 2-day FOMC meeting underway, the currency performed very poorly yet again. The expectations are for a no change to the Fed funds rate today, with the rate expected to remain at 0.00-0.25% until at least 2023. As per QE prospects, any further stimulus would likely come from a change to its forward guidance or in the pace of purchases.
Ahead of the FOMC outcome, we also have a busy calendar in Europe with preliminary December PMIs released. The US will also see its own series of PMIs published ahead of the FOMC. It’s also worth noticing of some change in fundamental valuations by the NZD as we get the the New Zealand government releasing its Half-Year Fiscal, Economic Update (HYEFU).
On Tuesday, we also learned that the US FDA determined Moderna’s COVID19 vaccine to be “highly effective”. This means the approval is immediate and may be ready for use by next week. This encouraging news come on the back of the development by Pfizer/BioNtech of its own vaccine with the rollout so far going smooth news sources report.
Furthermore, at last, the electoral college voting process was completed on Tuesday, publicly declaring President elect Biden as the winner of the US election. The main task for Biden once in office will be to tackle the record levels of Covid cases, deaths and hospitalizations. What’s more, with Christmas around the corner, the prospects of a worsening situation are definitely a big risk.
Economic indicators & events
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Source: Forexfactory
Important footnotes
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