03/12 – Dollar slide not likely to stop anytime soon

Jeremy Thomson-Cook
Jeremy Thomson-Cook 03 December 2020

GBP: Deadline volatility

EUR: No pushback on EUR strength

USD: Dollar hits lowest for 2 years


The closer you get to a deadline the more volatile a currency is likely to become and sterling’s performance yesterday was a dictionary definition of this fact.

Slipping through the morning session on headlines of a no-deal briefing by Michel Barnier and threats from French President Emmanuel Macron to veto any deal over fishing policy sent the pound over a per cent lower.

Asian markets have rebought the pound however, more against the USD than against the EUR and we remain within a small move of fresh year-to-date highs. GBPEUR is a different story and highlights the differences in prospects for sterling in 2021.

On the basis that a deal is forthcoming we believe that the pound will gain against the USD but advances against the European single currency will be harder to come by. In the meantime, nothing is guaranteed apart from volatility.


The single currency has continued to test the nerve of European policymakers, pushing ever higher against the USD, through levels that have typically prompted European Central Bank members to express their displeasure with the strength of the currency.

PMIs from the European services industries this morning will likely show a slowing of that sector, but it has been a while since the euro listened to the data. As we noted earlier this week, we expect this drive in EURUSD to remain until the ECB meeting a week today.

News this morning that the European Central Bank may lift its ban on banks paying dividends to shareholders should also keep European assets supported.

US dollar

Little by little, the dollar keeps creeping lower as markets more and more price in expectations of a vaccine led global recovery. It is difficult to see how that can be the case at a time when the US has just posted its deadliest day of Covid-19 fatalities with 2,700 people dying in the past 24hrs.

Once again, this is simply a show that while it is the US dollar, its movements are intrinsically tied to global fortunes. A world featuring stimulus talks, vaccine rollouts and economic recoveries from Canada to China is a world wherein the dollar is not needed as an asset anymore.

The greatest factor that could slow this fall in the USD remains the rollout of the vaccine. We have to remember that, following development, the vaccine moves from being in the hands of scientists – who have had a fairly good crisis – into the hands of politicians. And we know how they can be.


Elsewhere it is simply a growing list of currencies that are making multi-year highs versus the USD. South Korea, Canada, Switzerland, and Australia are just a few of the countries who are posting the best levels for their currency for 5 years in some cases.

This is the trend moving forward, it is the pace of the decline that is the major question.

Have a great day.