7October, 2020No Comments|| 2
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.
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.
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