On Tuesday, investors hoped that the US president would heed Jerome Powell’s call to help the US economy. They believed that, despite the political and pre-election disputes, Trump would allow his finance minister Steven Mnuchin to agree with the speaker of the lower house of Congress, Nancy Pelosi, on new incentives that American citizens and business need.
Unfortunately, that did not happen. The second day of negotiations was a disaster. On Monday, Mnuchin and Pelosi could not agree on the subject, but Trump canceled the possibility of continuing negotiations on Tuesday. Naturally, against this background, there was a sharp reversal of stock indices, and the US dollar, which has been tightly coupled with the demand for risky assets over the past months, received support.
The President said on Twitter that he would not help his political opponents pass their $ 2.4 trillion proposal, especially after they refused to allow his $ 1.6 trillion program in the past. In general, he made it clear that despite COVID-19, he continues the political struggle for the opportunity to be re-elected as a president. Also, he said that later he would resolve the issue of incentives.
What to expect soon
Assessing how intence the presidential race is, I believe that the tensions on the markets will continue.
What are the prospects for the US dollar and the dynamics of the foreign exchange market in general?
In my opinion, the dollar will continue to move sideways against major currencies until November 3, when the voting will take place. This is because investors believe that any of the winning candidates – Joe Biden or Donald Trump will try to implement the assistance program. It will be a decisive factor in the growth of demand for company shares with a simultaneous weakening of the US currency. In addition, it is possible that by the winter, the last tests of the COVID-19 vaccine will be finished, which should become a strong supporting factor for the growth of economic activity in the US, accompanied by the demand for company shares.