Trump’s Cancellation of Stimulus Talks Boosted the U.S. Dollar 

  • On Wednesday morning in Asia, the dollar threaded higher with investors digesting U.S. President Donald Trump’s immediate cancellation of talks on the latest stimulus measures. 

    The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.19% to 93.922 by 10:02 PM ET (2:02AM GMT) 

    The cancellation destroyed the sense of calm regained in the market after he was discharged from Walter Reed National Military Medical Center on Monday after being treated for COVID-19, and decreased risk appetite as hopes for the stimulus measures to be passed before the Nov. 3 presidential election evaporated. 

    Trump’s move also increased the downside risk to the U.S. economy, which was already shaky, but could increase safe harbor flows into assets such as the greenback. 

    “The reaction is a type of risk-off trade to buy the dollar and the yen against other currencies,” Mizuho Securities chief currency strategist Masafumi Yamamoto told Reuters. 

    “Without additional stimulus, the U.S. economy will slow, and the global economy will slow,” Yamamoto warned. 

    Trump, who is still in recovery from COVID-19 and the virus’ highest profile patient remains under medical surveillance, cancelled the talks with Democrats until after the election via a tweet. However, with the number of COVID-19 cases rising in parts of the U.S., the cancellation puts the country’s economic outlook in serious jeopardy. 

    Federal Reserve Chairman Jerome Powell sounded the warning bell on Tuesday in his keynote speech to the National Association for Business Economics (NABE) conference a mere hour before the Trump bombshell. Powell warned that the U.S. economy could slip into a downward spiral if COVID-19 is not effectively controlled and call for more economic assistance. 

    European Central Bank (EBC) chief economist Philip Lane also delivered a keynote speech to the conference. 

    Both the Fed and ECB will release minutes from their respective September meetings later in the day, with investors looking to comments from several Fed speakers over the coming days for further clues to the central bank’s outlook. 

    TECHNICAL OUTLOOK 

     

    In the daily charts of GBP/USD, the pair gained Wednesday morning in Asia Session. 

    The GBP/USD pair inched up 0.04% to 1.2883, with even optimism over the U.K.’s informal divorce talks with the European Union(EU) falling to shield the pound from the dollar’s gains. 

    As we can see in the support and resistance levels, the pair is still bouncing inside this area. With the Brexit woes and U.S. Presidential Elections coming up, there are a lot of uncertainties for placing positions ahead of the events.   

    The gains of the pair may be short-lived with the volatility the U.S. dollar is having of late due to Trump’s illness and cancellation of stimulus talks. Further confirmation if the pair will once again touch or break past the support level will be assessed by the following days and weeks. 

     

    Don’t forget to follow and subscribe for more updates about market trends, analysis, forex news, strategies and more!   

     

    Do you want to learn more about forex trading? Sign up now on our FREE forex webinar and reserve your FREE seats while it still lasts!   

     

    Risk Disclaimer:   

    Information on this page is solely for educational purposes only and is not in any way a recommendation to buy or sell certain assets. You should do your thorough research before investing in any type of asset. Learn to trade does not fully guarantee that this information is free from errors or misstatements. It also does not ensure that the information is completely timely. Investing in the Foreign Exchange Market involves a great deal of risk, resulting in the loss of a portion or your full investment. All risks, losses, and costs associated with investing, including total loss of principal and emotional distress, are your responsibility. 

     

Due to COVID 19 outbreak, we have transitioned everything ONLINE. This is to make sure there is zero impact on your safety, security and still maximize your learning experiences with Learn to Trade.

You can close this pop-up to see all our online schedules.