EUR Up This Week As European Stock markets Recovered

Lebanese Forex Market

To-date, the Lebanese Pound (LP) remained steady within the official range of US $/LP 1,514 to 1,514.5, with a mid-price of $/LP 1,514.25 by the week of October 23^rd 2020.

Lebanese Foreign Market remains prone to challenges, due to the ongoing of the Covid-19 pandemic and prolonged economic recession. However, this week the government imposed lockdown measures to counter Covid-19 and voted for Premier Saad Hariri to form the new government in hope to reach a recovery process.

The peg to the US Dollar at the official rate continues to be supported by the Central Bank’s total foreign assets totaling $25.6B in Mid-October 2020. However, BDL intervenes by namely allowing small depositors to withdraw their dollar savings in LP at the rate of 3,900 while keeping the rate of conversion into US dollars at the “official rate”.

In turn, the dollarization ratio for private sector deposits increased from 76.02% in December 2019 to 80.18% in August 2020.

As for Euro/LP currency pair, the Euro appreciated against the dollar-pegged LP with the currency pair going from last week’s €/LBP 1,764.60 to €/LBP 1,783.50 by October 23^rd, 2020. Moreover, the Nominal Effective Exchange Rate (NEER) of the LBP recorded a weekly downtick of 0.59% to stand at 127.99 points over the same period.

International Forex Market

The Euro/USD went upward from last week’s €/USD 1.1705 to €/USD 1.1831 by October 23^rd, 2020.

In details, the dollar fell to a one-week low on Tuesday ahead of a deadline for a new fiscal stimulus deal from Washington. Moreover, false hopes for a U.S. coronavirus aid package as of last week with rising coronavirus cases still limited gains on the US Dollar currency. It is worth mentioning that investors may refrain from engaging into large trading positions as COVID-19 cases surge and U.S. elections approach.

Importantly, we note that the Euro is trading higher against the U.S. Dollar as global stocks recovered from early losses which was also reflected in the recovery of European stock markets, before the No. 3. U.S. presidential election.

Commodities

Gold prices went slightly down this week by 0.20% to reach $1904.04/ounce. However, Gold rose to a one week high on Wednesday as the US Dollar depreciated after a new U.S. stimulus package was said to materialize ahead of the upcoming US election. It is worth noting, that Gold has gained more than 26% this year and is still considered a hedge against inflation and uncertainty for investors.

Crude oil prices rose this week by 1.62% to reach $42.46 per barrel and will probably advance as U.S. lawmakers discuss the size of a potential spending bill to boost economic recovery. In details, oil gained some support after Russian President Vladimir Putin added his comments on Thursday that Moscow did not rule out extending OPEC+ oil output cuts. Moreover, OPEC+ is due to increase production by 2 million in January 2021 as part of a plan to pump more as demand recovers.