U.S. dollar has returned to lows

Last week currency markets reflected overall positive sentiment among investors, pushing the U.S. dollar to its lowest level since September 2020. If the value of the global reserve currency were to fall further, then it would reach its lowest point since May 2018.

The news of the U.S. Presidential election was unfavorable to Donald Trump, and state judges have dismissed lawsuits questioning the validity of the election based on a lack of evidence. It is likely that the final word will be given by the Supreme Court.

USD

U.S. economic data was positive:

• The country's retail sales grew 5.7% year-on-year and have, so far, not reflected declining government support for the population, which has continued to maintain a positive shopping sentiment
• Sales in the secondary real estate market showed further growth and was 6.85 million per year, the highest level since 2006
• Meanwhile, industrial production in October was -5.3% lower than a year ago, which suggests lower economic activity in the sector
• The number of new jobless claims rose slightly from 0.71 to 0.74 million a week.

The level of coronavirus infections has remained at high levels:

• In the U.S., further growth was seen and the number of infections in one day almost reached 200,000
• In India, the number of illnesses was stable at 45,000 for the third week in a row
• In Brazil, cases increased from 24,000 to 36,000 per day

In France, a positive trend persisted and the number of cases fell to 18,000 a day.

Euro

The main currency pair, EUR/USD, grew slightly, reflecting higher demand for riskier instruments. There were very few economic data releases, most notably the actual annual inflation in Europe in October, which stood at -0.3%. European Central Bank President Christine Lagarde promised, at a press conference, that at the December meeting, more decisive action will be taken by the central bank to combat the economic slowdown caused by the coronavirus.

The EUR/USD pair ended the week appreciating 0.2%.

JPY

The most important Asian pair, the USD/JPY, fell below 104.0 again. Economic data included the following:

• The change in the country's economy in the third quarter, which rose 5.0% compared to the second quarter of 2020
• Industrial production was -9.0% lower than a year ago.
• The change in exports in October was only -0.2% lower than a year ago
• Actual inflation in the country was -0.4% in October

The USD/JPY pair ended the week with a fall of -0.8%.

GBP

The British pound has risen steadily against the U.S. dollar over the past week, reaching almost 1,330 points. Economic indicators included the country's annual inflation, which was 0.7%, and retail sales, which grew 5.8% year-on-year.

GBP/USD ended the week up 0.7%.

Economic events

This week will begin with the preliminary results of the PMI index of manufacturing and services sectors in the largest economies. The rest of the week will unfold as follows:

• U.S. Consumer Confidence Index data will be expected on Tuesday
• U.S. industrial order numbers and the country's third-quarter economic growth results will be monitored on Wednesday
• The minutes of the last meeting of the U.S. Federal Reserve will also be announced on Wednesday.
• No important data is scheduled for Thursday and Friday

U.S. markets will close on Thursday and close earlier on Friday, due to Thanksgiving.

According to Admiral Markets market sentiment data:

• 36% of investors have long positions in the EUR/USD pair (up 1 percentage point from last week)
• In the main Asian pair, USD/JPY, 81% of investors have long positions (increased 20 percentage points)
• In the GBP/USD pair, 27% of participants expect a rise (decreased -7 percentage points)

Such market data is interpreted as contraindicative, therefore EUR/USD and GBP/USD pairs are expected to rise and USD/JPY is expected to fall. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.

Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com

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