What is the reason for the currency market’s behavior?

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The new US president’s election faded into the background as the latest debates between Donald Trump and Joe Biden didn’t reveal an apparent leader. On the opposite, the COVID-19 pandemic situation has wholly captured the markets.

The latest reports that the COVID-19 pandemic began to take off again in the United States and Europe with the US’s news about new infection records forced market participants to fully switch to this topic, pushing back the glimpses of global economic recovery. Investors again start to think if they should trust the rumors about the soon recovery. The stock markets are showing full-fledged sideways dynamics. I predicted this a month ago, assessing the high uncertainty factor in the outcome of the US’s presidential elections, the absence of a vaccine against COVID-19 and ambiguous quarterly reporting of companies, which is a direct consequence of the situation with COVID-19.

The picture is also similar in the foreign exchange markets. Major currency pairs are consolidating in sideways ranges. After rising at the beginning of last week, the EURUSD pair moved into a consolidation in the wake of falling demand for risky assets due to the Brexit topic. The outcome of this epic battle is unclear. It’s safe to say that any development of the situation will lead to GBPUSD growth since the most important negative factor for the pair has been Britain’s uncertainty factor exit from the EU.

After a strong gain against the dollar last week, the Japanese yen also began to consolidate, which fully indicates that the markets have taken a wait-and-see attitude to observe the outcome of the US’s presidential race and its consequences second wave of COVID-19. Commodity and raw currencies also fully reflect the financial markets’ situation with their movements against the dollar.

What to expect soon

I believe that the current market behavior will continue this week. Investors will avoid making any significant purchases due to the increasing pressure from COVID-19 and ahead of the presidential election outcome in the US on November 3.


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