The dollar fell on Friday, succumbing to waning COVID vaccine enthusiasm after regaining only about half of last week's losses as investors confronted a tough pandemic-fighting winter ahead and consumers showed signs of caution.
Reflecting worries that the economy may suffer more damage before any vaccine is broadly distributed, University of Michigan consumer sentiment -- particularly expectations -- came out unexpectedly weak nAQN03DOXI, subduing U.S. Treasury yields and thus depriving the dollar of interest rate support.
EUR/USD extended its recovery from this week's 1.1920-745 drop, helped by pre-weekend book-squaring that restored its positive correlation to stocks.
Bulls still need to prove the sketchy range trading since September's peak is over and the downtrend from 2011 and 2014 highs has been reversed nL1N2HZ1O5.
Sterling outperformed on hopes that the departure of two key Brexit hardliners from Prime Minister Boris Johnson's staff of advisers nL8N2HZ1NHnL4N2HZ2DR would increase the chances of Britain reaching a trade agreement with the EU.
The market has been optimistic on a deal, but Johnson's spokesman said "difficult issues remain" nL8N2HZ4AM.
GBP/USD retraced most of Thursday's 1.3228-108 drop that held 10-day moving average, 50% Fibo and cloud top supports nearby.
Firmer equities lent a hand to risk-sensitive cable.
A meeting next Thursday of European leaders looks pivotal for achieving an agreement before the year-end deadline, though previous timelines have been missed.
USD/JPY's 2% surge on Monday now appears to have been a selling opportunity within the downtrend from March's pandemic panic highs.
Friday's wider yen gains, even against the Swiss franc, show demand for the safe-haven Japanese currency exceeding the dollar nL1N2HZ1MT, despite a moderate risk-on theme in markets.
The yen still looks attractive versus the dollar on a current account comparison basis and on doubts the Fed will back away from zero rates and pandemic relief measures anytime soon.
AUD/JPY, the FX risk gauge, held key support in its correction from Monday's surge on vaccine hopes as investors expect more limited COVID lockdowns to avoid damaging longer-term prospects as vaccine development comes closer to fruition nL1N2HZ1CC.
AUD/USD bulls may be forced off the fence after Friday's nice rebound from close to the rising 10-day moving average, aided by the day's risk-on flows nL1N2HZ1R3.
Next week's data highlights are U.S. retail sales and industrial production on Tuesday.
Ongoing attention will be paid to pandemic news and Brexit talks ahead of Thursday's meeting of EU leaders.
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