U.S. Dollar Plummets as Risk-on Increases
The U.S. Dollar is getting crushed this morning following days of market risk-appetite in the midst of intense counting of votes left in a tight U.S. presidential race.
Per the Bloomberg Dollar Spot Index, the greenback is trading around its weakest levels since May of 2018. The results of the U.S. vote seem like they will be clear in less time that forecast as former Vice President Joe Biden is at the brink of clinching the necessary electorate votes to declare victory.
Markets are said to be on the positive primarily because of excitement over having an established situation in which the Fed and perhaps Congress can get moving on additional aid to the economy.
Today may be a day of major announcements as the race comes to a finish and the head of the Fed, Jerome Powell, make a case for complementing the Fed’s incessant efforts to help the financial system.
Regardless, as we have mentioned in media appearances and in writing, it will be hard for Fed programs and new ideas to have any impact without the accompaniment of law that allows for spending. Infrastructure is being thrown around again as the best possible chance at bipartisan agreement and Powell may even talk about it himself. There most definitely needs to be a demand for greater action as labor data in the form of underwhelming Jobless Claims and non-Farm productivity are only adding to the disappointment.
What to Watch Today…
- FED Decision and Press Conference 2 PM
How will the three election outcome scenarios affect USD? Find out here…
The Euro and others are on major recovery mode as the shared currency escaped being in the weakest levels since September.
Although major nations have declared lockdowns such as in the Netherlands and economic data is looking slower in German Factory Orders and others’ idiosyncratic national indicators , the Euro is up on the narrative of a steadier global recovery that can be anchored by new expenditures from the U.S.
The EU is said to have downgraded the growth outlook, but this has no influence at the moment with the short-term the main focus for all
Pound climbed along with other peers against the buck as the risk-on sentiment is carrying all other assets upward.
Although the government is spending more and the Bank of England decided to expand its quantitative easing program, movement is being dictated by market speculation on the U.S. future. Anything can happen with Sterling the next few weeks as the spotlight turns on Brexit talks that are looking more amicable for now.
Catch the latest movements in FX in our November Currency Outlook…