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 20, 2020.
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 80.22% in September 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 1,782.43 to €/LBP 1,785.81 by November 20, 2020. Moreover, the Nominal Effective Exchange Rate (NEER) of the LBP recorded a weekly downtick of 0.36% to stand at 126.85 points over the same period.
International Forex Market
The Euro/USD went up from last week’s €/USD 1.1824 to €/USD 1.1846 by November 20, 2020. In fact, The US dollar has lost ground against riskier currencies for over a week as investors ‘longer-term optimism about COVID-19 vaccines ran in to worries about rising infections and risks to the fragile global economic recovery. In details, surging coronavirus cases in the United States have exerted opposing forces on the dollar, with a safety bid supporting the currency while fresh speculation of monetary easing to boost the economy has undermined it. Meanwhile, the focus this week was on the pound which performance will be determined by the post-Brexit trade deal. In details, The EU and Britain are very close to agreement on most issues as time runs out for a trade deal but they are still at odds over fishing rights, guarantees of fair competition and ways to solve future disputes.
Commodities
Gold prices went slightly down this week by 0.45% to reach $1,867.36/ounce. It is a well-established fact that dollar weakness provides a tailwind that will usually move gold pricing higher. However, in the case of this week, we have seen both gold and the U.S. dollar trade lower. In fact, rising prospects of a Covid-19 vaccine are threatening to kill off the bull market for gold. Meanwhile, Crude oil prices rose this week by 1.54% to reach $44.2 per barrel despite conflicting U.S. stimulus reports, an apparent disagreement in OPEC, and the ever-rising COVID-19 numbers. In details, the continuing rampage of COVID-19 across the globe continues to form the main driver of oil prices, as the coronavirus pandemic escalates, with Western economies particularly hard hit. Adding to market caution are suggestions of split within OPEC, the United Arab Emirates (UAE) are taking stance unusually at odds to that of Saudi Arabia. The UAE is suggesting that continuing the current supply cuts may not be the way forward, whereas Saudi Arabia has been strongly advocating the reverse. There have been strong, but unverified, reports that the UAE may even be considering quitting its membership of OPEC.