The last day of the month on the world markets began with a sharp decline in futures for major American stock indices, followed by European ones. As for the dynamics of trading in Asia, it was initially mixed on the background of the publication of positive data on manufacturing indicators from China, but then negative. The US dollar in the Forex market remains under pressure on the wave of the generally persisting demand for risky assets. But if the correction continues, then the dollar will clearly receive support.
The decline in futures for world indices is most likely due to technical factors and the end of the third quarter of the most prosperous month for growth. During November, the demand for risky assets gained significantly due to the news about effective vaccines, which caused a noticeable increase in the markets’ positive mood. Besides, the news that the Trump administration may blacklist China’s leading microchip company SMIC and the national offshore oil and gas producer CNOOC lead to a decline. It is believed that these measures could lead to an escalation of tension between Washington and Beijing before Joe Biden come to power in January.
In the wake of strong demand for company shares and numerous stimulus programs, the US dollar remains under pressure. The US currency ICE index is approaching a local minimum of 91.725 points from August 30 of this year. At the time of this writing, the indicator is at 91.677 points.
Locally the dollar may likely receive support if the indices support the decline in stock index futures. We should most likely expect its continued decline in the foreign exchange markets, primarily due to the anticipated persistence of demand for risky assets after the correction in the equity markets.
Manufacturing PMI data for November was released today. The indicator added to 52.1 points from 51.4 points, with the forecast of an increase to 51.5 points. Also, the data of the non-manufacturing business activity index (PMI) of China for November rose to 56.4 points from the October value of 56.2 points against the background of the forecast of a decrease to 56.0 points.
The indicators’ values indicate that the Chinese economy continues to recover from the COVID-19 pandemic, thereby supporting the global economy.
Thoughts and conclusions:
I believe that a smooth weakening of the dollar rate should be expected after some correction in the stock markets, which may lead the US currency to limited growth.