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Safe haven suffer amid vaccine euphoria

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16 November 2020

Written by
Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.

As the US election and Biden’s victory receded into the background, the big news last week was the very promising results in a COVID vaccine trial.

arkets reacted euphorically on Monday. Although they gave back some of their early gains, stocks still posted healthy gais for the week. G10 currencies did not move much, except for the safe havens like the Yen and the Swiss Franc.

The big mover of the week was the Turkish Lira, up over 10% on news that Erdogan was ditching its bizarre monetary policies and Turkey would try to stop the fall of the currency using a more conventional approach.


Trade negotiations with the EU continue to make little progress. However, Biden’s victory in the US Presidential election will mean a less accommodating White House from the UK perspective, and may prod Boris Johnson’s government towards the modest trade deal we expect. Markets seem to agree and Sterlinghas performed well since the US election. A key milestone is the EU council meeting on Thursday, so we expect to see some progress in the discussions this week.


Worsening COVID news from the Eurozone seems to have taken the wind out of the Euro’s rally, in line with our forecasts. Eurozone industrial production numbers for September came in under expectations, adding a bit to the general gloom. However, last week bad contagion numbers out of the US balanced this out somewhat and the Euro ended the week more or less unchanged against the US dollar. With little key economic data out this week, ECB speeches and communications will take center stage, as markets prepare for the key ECB meeting in December where additional easing measures are almost certain to be announced.


Markets continue to come to terms with the likelihood of a Biden presidency combined with a divided Congress for at least the next two years. While it is not entirely out of the question that the Democrats may take both Senate runoffs in Georgia, it is more likely that fiscal stimulus will be limited by a Republican-controlled senate. We maintain a bearish stance towards the US dollar in the long term, particularly against the EM currencies that sport good fundamentals.

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