Trading on the world markets today is characterized by low activity and uncertain dynamics. The stock markets continue to grow in Europe, but it has clearly slowed down in the US. In foreign exchange markets, the movement of major currency pairs remains indistinct and multidirectional.
What is the reason for this behavior of the markets?
The rally in the stock markets, based on Joe Biden’s victory in the presidential election, which has not yet been officially recognized by Donald Trump, received an additional impetus on Monday in the wake of news from Pfizer and BioNTech companies. They announced a 90 percent success rate for coronavirus vaccine trials. But later, the rally has stalled. I believe there are two reasons for this. The first is the lack of official recognition of Joe Biden as president. The second is the desire to see real results supporting the statement about the vaccine trial’s success. Since the market is now focusing on these two problems only, practically not paying any attention to the incoming statistics or the number of COVID-19 deaths, only severe shifts in these two issues can lead to a rally in the stock markets.
In the foreign exchange market, everything is under the external influence of the stock markets’ situation. The demand for risky assets (company shares) put pressure on the US dollar, yen and Swiss franc rates, which fell sharply against the dollar.
I have already pointed out that the weakness of the dollar, confirmed by massive stimulus programs, is justified. Still, other world central banks’ aspirations, whose currencies are also under pressure due to monetary policies and stimulus measures from these central banks, do not allow them to strengthen against the US currency. That is why we are witnessing a wide but range trading, which, in my opinion, will not end soon.
What to expect soon:
I believe that the markets’ general behavior in the near future will entirely depend on who won the presidential elections in the US and when the COVID-19 vaccine becomes available.