Interbank market news scan as of 11:30 am AST: Central Banks, Foreign Exchange; US economy expands in last quarter of 2020

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Currency pairsExchange Rate Before Event 11:07am ASTEventPost EventExchange Rate Post Event
AUD/USD0.7681GDP release0.7602USD strengthening
USD/CAD1.2774GDP release1.2829USD strengthening
USD/CNY6.4822GDP release6.4603USD weakening
EUR/USD1.2118GDP release1.2129USD weakening
USD/INR73.0500GDP release72.9664USD weakening
GBP/USD1.3715GDP release1.3700USD strengthening
USD/JPY104.0600GDP release104.4100USD strengthening
USD/MXN20.7000GDP release20.3430USD weakening
USD/DKK6.1554GDP release6.1312USD weakening
USD/NOK8.6242GDP release8.6860USD strengthening
Sources: Federal Reserve, Reuters

 The U.S. Bureau of Economic Analysis today reported the following:

“Real gross domestic product (GDP) increased at an annual rate of 4.0 percent in the fourth quarter of 2020, reflecting both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States. In the third quarter, real GDP increased 33.4 percent.”

The takeaway …

I can’t say with any certainty that today’s report has a direct effect on foreign exchange rates.  The US dollar has been weakening for some time and weakness is expected throughout the rest of the year.  Given yesterday’s announcement by Federal Reserve chairman Jerome Powell that the fed funds target rate would remain the same (0-.25%) and that running the inflation rate above two percent would continue, the lack of change in dollar weakness is no surprise.

Traders should expect the Biden administration will maintain a strategy that has addressing Covid-19 at its core.  Deviation from this policy path should inform traders that not only is spread of and infection by the virus under control but the U.S. political economy is moving back to pre-pandemic activity.

In other news …  

China’s interbank treasury bond index in net price opened at 979.94 points Thursday, lower from the previous close of 980.43 points, according to the China Foreign Exchange Trade System. China’s interbank treasury bond index opens lower Thursday – Xinhua | English.news.cn (xinhuanet.com)

The Nigerian government has become dependent on central-bank borrowing and will struggle to wean itself off the copious money printing that has raised concerns about the health of Africa’s largest economy, according to market observers. Nigeria’s Addiction to Central Bank Money Seen Hard to Cure – Bloomberg

Central banks representing one-fifth of the world’s population are likely to issue their own digital currencies in the next three years, a survey by central bank umbrella group the Bank for International Settlements shows. Central bank digital cash could come to 20% of the world in three years – BIS | Reuters

Yemen’s central bank dismissed United Nations allegations that the Yemeni government misused millions of dollars from Saudi Arabia to buy essential commodities for the Yemeni people. Yemen’s central bank dismisses UN corruption allegations (apnews.com)

The European Central Bank’s views on the euro this week amount to a declaration of “currency war,” according to research from one of Germany’s biggest banks. ECB In ‘Currency War’ Over Euro, Commerzbank Strategist Says – Bloomberg

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