nd the risk positivity to continue into next year,” said Craig Chan, head of global FX strategy at Nomura, on an outlook call with journalists.
He forecasts the euro to hit $1.28 and the yuan to reach 6.2500 per dollar by the end of next year.
DINNER DATE
Sterling, which has whipsawed while trade negotiations are deadlocked, steadied against the weaker dollar but remained on edge going in to the leaders’ meeting.
Britain faces a chaotic split from the European Union if no trade deal can be struck by the end of the year because Brexit transition arrangements would expire without measures to protect about $1 trillion in annual trade from tariffs and quotas.
Volatility gauges for the pound have soared to reflect what traders reckon is a wild ride ahead. One-week sterling implied volatility hit a fresh eight-month high on Wednesday and the premium of puts to calls is elevated.
“Put a gun to my head and I’d be a buyer of sterling, as I see the risk skewed that Boris would come back with some sort of agreement,” said Chris Weston at Melbourne broker Pepperstone, though he added rewards for such a bet might be limited.
“Broad positioning is short sterling, but not at extremes by any means. This limits the prospect we get an exaggerated short-covering rally to say $1.3800 or $1.4000.”
Meanwhile, Britain began the world’s first mass COVID-19 vaccination on Tuesday, the same day that President-elect Joe Biden pledged to vaccinate 100 million Americans after taking office. Both moves supported markets’ confidence.
Investors are also tracking negotiations over U.S. coronavirus aid, with the Trump administration proposing a $916 billion package on Tuesday after congressional Democrats rejected a slimmer plan.
The Japanese yen was little changed at 104.14 per greenback, but J.P. Morgan sees a break of the psychologically key 100 level as only a matter of time with the U.S. Federal Reserve maintaining ultra-easy monetary conditions.
“When the Fed has the policy rate at zero, the dollar tends to weaken against the yen in a risk-on environment,” said Tohru Sasaki, the bank’s head of Japan market research in Tokyo. “Dollar-yen is getting heavier and heavier.”
– Reuters