MarketDeal24.Com – Currency and equity prices fell on Wednesday as the Dow Jones Industrial Average fell nearly 900 points. Earlier in the week we said that the market could collapse for a few days if panic selling starts.
The Senate has chosen Justice Barrett and there is no possibility of a US incentive package. The prospect of a stimulus was long overdue but investors were somewhat optimistic as the stock market soared over the past week.
But now the reality is being observed, so it would be wise to give up their position now. There is no doubt that Americans will get a big incentive, but after the election, meanwhile, the risk in the market is increasing in the coming weeks between the US election and the terrible situation of Corona across Europe. Although the USD/JPY is at its lowest level in a month, at the end of the day, the US dollar is known as a safe haven and has traded upwards against all other currencies.
Today, the US dollar is heavily dependent on the third quarter GDP of the United States. Although growth slowed in the second quarter, there is a possibility of increase growth in the third quarter, but the question is how much will increase and how will investors take it. The U.S. government is not taking the record-breaking corona outbreak as seriously as other countries trying to fight the corona virus. Some states, however, have imposed restrictions on their own. However, if GDP does not grow as expected today, the value of the US dollar will rise against other major currencies, including the euro and the Australian dollar.
However, the European Central Bank is currently under the most pressure. In today’s meeting, although they are optimistic about keeping their economic policies unchanged, there is also the possibility of announcing new policies by surprising everyone. Corona infections in Europe have gone out of control. At first, the governments of the countries were reluctant to give a full lockdown, but now they realize that they have no other choice.
Today Germany announced a partial lockdown for a month, with restaurants and bars closed in November. France has announced a nationwide lockdown until December 1. In France, everyone is ordered to stay at home except for necessary work, and non-essential shops are closed for two weeks. It will be decided in two weeks whether they will open the store or not. Retail stores in Germany can be kept open for a certain period of time.
Economists expect the ECB to change its monetary policy somewhat and Central Bank President Lagarde could cut interest rates in December. However, amid negative price pressures and the risk of a major recession, the ECB may decide earlier. If this happens then the value of EUR/USD will increase. On the other hand, the ECB may not take a decision in favor of the euro. If that happens, the euro could fall to around 1.16.
The USD/CAD has risen as the Bank of Canada keeps its economic policy unchanged. Australia’s inflation report is a good but as a risky currency The AUD and NZD have depreciated.