Flighty financial markets are closely monitoring the U.S election saga that is still unwinding after Election Day on November 3. As Democratic nominee Joe Biden gets more and more votes, risky assets and currencies against the U.S. Dollar are seen to be getting more support. This trend is not only supported by the democratic promise to approve the large relief bill of $2.2 trillion, but also by hopes of smoothing trade tensions and geopolitical confrontation with China that would most likely improve global trade in investments.
This sentiment is supported by rising stock indexes that gained 1.2-3.8% on Thursday. Crude prices are benefiting too as Brent crude benchmark prices fearfully bounced from panic lows of $35.7 per barrel to end of October levels of $42 per barrel (currently $40.73 per barrel). The upward swing in crude prices was supported by falling crude reserves in the United States by 8 million barrels, according to the Energy Information Administration. The important resistance level of $43.5 per barrel may become the target of this upside movement.
The U.S. Dollar suffered a defeat as a safe haven asset. The perspective of the sharp increase of the money supply in the United States may be the factory that is pushing the Greenback to lose some of its value with a follow up of decreasing interest rates, and overall the attractiveness of the investments in the Dollar alongside with other U.S. safe haven assets like Treasuries. The U.S. Dollar index declined from 94.3 points in the first days of November to 93 points. The index may face a stronger support at 92.5 points. The yields of 10-year U.S. Treasuries, according to this trend, slipped to 0.73% from 0.94%.
Meanwhile, trials and tribulations of the U.S. election campaign are far from being recollected. Mr Trump is certainly unsatisfied with such election results and he has filed several suits to challenge them in the Supreme Court. The Republican upper hand in the Senate may also encumbrance the large relief package rushed by Democrats.
The extensive second virus outbreak in Europe, U.S. and other major economies, along with possible lockdown measures, seem to curb the appetite for risk in the financial markets. The Federal Reserve’s Federal Open Market Committee and the press- conference of the Federal Reserve’s (Fed) Chair Jerome Powell - that are scheduled for Thursday - are major events that could provide further guidance for the markets. No substantial changes in the U.S. monetary policy are expected, but certain aspects of it ( in words of Mr Powell) may impact prices of major assets in one way or another.
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