EUR Up This Week As US Elections Remain Indefinite

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 November 6^th 2020.

Rushing the cabinet formation beginning of the week promised the Lebanese of a positive outcome, followed by the drop in the USD/LBP exchange rate observed in the parallel market. However, as of Friday 6^th of November, news reported that the US is set to impose sanctions on former Foreign Minister Gebran Bassil, therefore, government formation efforts are expected to be further complicated which led the Lebanese pound to deteriorate to reach around LP 7,250.

The peg to the US Dollar at the official rate continues to be supported by the Central Bank’s total foreign assets totaling $25.43B in 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 1,757.07 to €/LBP 1,786.58 by November 6^th, 2020. Moreover, the Nominal Effective Exchange Rate (NEER) of the LBP recorded a weekly downtick of 0.76% to stand at 128.64 points over the same period.

International Forex Market

The Euro/USD went up from last week’s €/USD 1.1656 to €/USD 1.1851 by November 6^th, 2020.

The Euro is trading higher against the U.S. Dollar on Tuesday as a jump in higher risk assets drove investments’ demand lower for the safe-haven U.S. Dollar and made emerging markets get more attracted for non-dollar investors. The uncertainty in the US market is ongoing as votes are still to be counted, with Democrat Joe Biden taking the lead over President Donald Trump in Georgia and narrowing the gap in Pennsylvania, yet a thrilling contest remain on the heel.

Moreover, the US is still prone to a wide spread of Covid-19 cases and absence of new fiscal stimulus affecting its economic recovery. In addition, the Labor Department declared that the U.S. has hired the fewest number of employees in October in relation to the past five months.

Commodities

Gold prices went up this week by 4.36% to reach $1,948.56/ounce as the US Dollar weakens this week.  In fact, Gold prices are in a battle between the US Dollar to see where investors feel more confident about hedging their risk exposure. Moreover, it is said that a possible stimulus coming from the United States later this year or early next year could act as a strong driver for Gold to move higher.

Crude oil prices rose this week by 8.71% to reach $40.93 per barrel as the United States heads into presidential elections. This could be explained by higher demand now in reaction to a possible extension of current oil output restrictions that would go into the first quarter of 2021, as discussed by Russian Energy Minister Alexander Novak.