By the end of the week, the US dollar added to the basket of major currencies, and at the time of this writing, its ICE index was at 93.75 points, which is higher than a week earlier, when it closed at 93.06 points.
The exchange rate of the US currency is still wholly dependent on three critical factors that affect the US dollar and the dynamics of world markets in general. First of all, it’s the expectation of the US’s presidential election results, which can lead to unpredictable consequences in acts of disobedience of the losing party, as previously stated by representatives of both the Republican and the Democratic parties. Seconds of all is the second wave of the Covid-19 pandemic and the expectation of new stimulus measures in the United States.
As for the election results, Donald Trump is losing to Joe Biden, according to media reports, which generally has a beneficial effect on the demand for company shares since investors believe that Biden’s presidency will be positive for the country’s economy. Concerning the impact of the COVID-19 pandemic, I think that is unlikely to become a reason for new closings of entire countries’ economies, as it was this spring, because this will lead to severe social consequences. In my opinion, the expectation of the new incentives has faded. Investors will now be interested in the very fact of their adoption, which continues to be a problem.
I believe that the upcoming week will be similar to the previous one. In general, I expect the continuation of vague movements in the currency markets. The dollar may come under pressure against a basket of major currencies this week, but in general, its dynamics will remain sideways until the end of this month. The US currency is supported only due to its primary function – the world reserve currency. As long as investors believe in the dollar, it will receive support in the wake of various uncertainties I described above. It won’t even be negatively impacted by the monstrously record US budget deficit, which reached $ 3.132 trillion this year.
What to expect soon
I believe that the dollar rate this week will be fully guided by the factors I described above. Any negative news will push it higher against major currencies. Simultaneously, the possibility of accepting new incentives will put pressure on it. In general, I believe that the sideways dynamics in the foreign exchange market will continue this week.