This week will be positive for the demand for risky assets and negative for the dollar

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Over the past week, nothing in the main markets drivers has changed. The confidence among investors that Joe Biden is the winner of the presidential race in the US continued. There was plenty of news about the efficacy of COVID-19 vaccines from different companies. The FRS members stated that the super-soft monetary policy remains. Finally, heightened expectations that the US will receive new, so-called anti-covid measures of assistance from the authorities supported the markets. Meanwhile, the negative factor of COVID-19 victims and the quarantine measures also had an effect.

Moderate optimism continues to reign in financial markets in general. Investors want to buy risky assets, reasonably believing that now is the best moment for it, since shares are cheap after the recent fall during the first wave of the COVID-19 pandemic, and will naturally continue to grow in price as the economy recovers when the impact of the coronavirus declines.

In foreign exchange markets, the US dollar remains under pressure. The main reason remains the topic of a decrease in demand for defensive assets against the backdrop of the growing demand for risky assets. An additional negative is the strengthening of expectations, promised before the presidential election of stimulus measures from the US authorities, that suppose to provide more than $1 trillion to help small businesses and the US population.

Euro remains in the wider range of 1.1615 and recently in its narrow part 1.1815-1.1890. This behavior of the pair can be explained by the growing weakness of the dollar and by the absence of serious forces for the growth of the euro itself. The pound gained last week due to revived hopes for Brexit talks, which stimulated its growth. Commodity currencies also received support last week on a general positive wave. The Australian and New Zealand dollars were especially distinguished, growing on the wave of the conclusion of a new large-scale trade agreement by Asian countries. The Japanese yen and franc also received support in the wake of volatile trading.
Commodity markets were also positive. The hopes that the COVID-19 pandemic will come to an end and will lead to economic growth stimulate all commodity assets upwards.

Thoughts and conclusions:

In general, the situation on the markets can be characterized as moderately positive and conducive to the demand for risky assets. The US dollar is likely to remain under pressure this week.


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