U.S. Dollar Drops As Pre-Election Jitters Set In

U.S. Dollar Drops As Pre-Election Jitters Set In

Kathy Lien  | Oct 14, 2020 21:23

The U.S. Presidential Election is three weeks away and investors are finally beginning to feel the jitters. Stocks sold off for the second day in a row, driving currencies lower in the process. This will be the most dramatic presidential race in recent history and, while most polls show Joe Biden in the lead, investors have grown leery of trusting the polls after being burned in 2016.
Over the past few weeks, equities and currencies rallied on the hope that some type of stimulus would be approved before or shortly after the election. However, at this stage, it is looking increasingly unlikely. House Speaker Nancy Pelosi has repeatedly described President Donald Trump’s stimulus offer as grossly inadequate. The sell-off in stocks today was sparked by Treasury Secretary Steve Mnuchin’s pessimism. After another conference call with Pelosi, he admitted they continue to be far apart on certain issues and getting something done before the election will be difficult. This suggests that he’ll push harder to get Congress to allow the government to tap unused Paycheck Protection funds. Meanwhile, the longer that fresh aid is withheld from Americans, the more difficult it may be for the recovery to continue. Over the next 48 hours, we’ll get to see if that slowdown has begun with the Empire State and Philadelphia Fed manufacturing surveys scheduled for release on Thursday and retail sales on Friday.
The U.S. Dollar traded lower against all of the major currencies on Wednesday with the exception the Canadian dollar. Despite good data and rise in oil prices, USD/CAD found support above 1.31. The Australian dollar rallied despite weaker consumer confidence, but the move in the New Zealand dollar was justified by positive comments from RBNZ Assistant Governor Christian Hawkesby, who said some economic data is surprising to the upside. Australian labor market numbers are scheduled for release this evening followed by New Zealand PMI numbers tomorrow. While Australia and New Zealand have their own troubles (the RBNZ is serious about negative interest rates), the fact that Australia reported only 24 new coronavirus cases and New Zealand reported two at a time when cases in the U.S. exceed 50,000 a day, France tops 10,000 a day and cases in Italy exceeded 7,000, the outlook for the Australian and New Zealand dollars are brighter in comparison. 
The coronavirus pandemic in Europe is worsening quickly. Italy reported its highest ever daily virus cases, while Germany is closing in on its record high. France declared a national state of emergency that will mean curfews for major French cities. As we said in yesterday’s note, the Eurozone economy will be hit hard by the second wave. We’ll see major evidence of this next month when October data is released. For now, we continue to believe that the path of least resistance for the euro is lower. 
With the Oct. 15 Brexit deadline looming, sterling traded sharply higher, gaining the title of the day’s best performing currency. GBP has been remarkably resilient despite the breakout of COVID, the threat of a circuit breaker if their tiered system doesn’t work and there is a hard Brexit. Investors remain optimistic as they latch onto reports that the UK won’t give up on Brexit talks. Negotiations are entering a critical stage and we think that the most likely best case scenario is that the deadline gets pushed. 

Kathy Lien

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Minh Điều
Minh Điều

Thank you so much!  ... (Read More)

Oct 14, 2020 22:35 GMT· Reply
Minh Điều
Minh Điều

Thank you so much!  ... (Read More)

Oct 14, 2020 22:34 GMT· Reply
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes


Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.