Some traders believe that the dollar was bolstered by the US economic data as the manufacturing figures in September and the US home sales in August were improved. On the other hand, the fears of another wave of coronavirus pandemic over Europe and the UK hurt the sentiment of the Euro and the Sterling, boosting the dollar as well. The UK Prime Minister, Boris Johnson, announced the reimplementation of the lockdown measures in England on Tuesday.
The European Stock markets are opening lower, as the resurgences of coronavirus pandemic added fears of another lockdown measures in those regions. The WHO warned that the situation is “very serious”, further triggering the concerns over the economic recovery of the euro zone. The total confirmed cases of Covid-19 have now passed 30 million worldwide, with more than 940000 deaths. Sterling’s move, with a very volatile night, was the focus in FX. As the BOE hinted the potential implementation of negative interest rates, the sterling sharply dropped to the low of 1.2864 on Thursday. Afterward, it was reported that the EU-UK trade deal was still possible, as the comment from the European Commission President Ursula Von der Leyen, boosting the sterling back to 1.3 mark.
The EU has warned the UK that the bill would hurt the trade deal ahead, and the EU will prepare for the worst, letting UK to leave without any deal. The Sterling bounced back to 1.29 level against dollar on Monday US session, but dropped back to 1.2850 area for closing. Despite improved risk appetite and the slip of dollar, Sterling is clearly bearish. The dollar index broke 93 mark again on Tuesday earlier trading session.
In FX, the dollar was steadied on Friday earlier session, after a volatile move overnight. The latest policy direction from ECB boosted the euro up to 1.1917, weakening the dollar in the US trading session. But, the tumble of the US stocks sparked risk aversion, triggering a rebound of the dollar against the major currencies.
Still, the market focused on President Trump as he once again raised the idea of “decoupling”, saying that the US may separate its economy with China, meaning no more business between both countries, the world’s two biggest economies.
There are different interpretations for the market crash. Most of the analysis believe that “overvaluation” would be the main reason. Investors may be doubtful about the sustainability of those high price stocks. On the other hand, before the Non-Farm payrolls on Friday, investors may book the profit, triggering such big move. In addition, negotiations of the new stimulus package between the White House and the Democratic Party have no progress at all, sparking concerns over the lack of fiscal policy.
The latest news is that TikTok has selected a potential buyer already, and the transaction involves the company’s business in the US, New Zealand and Australia. The result will be announced as soon as Tuesday. Based on information over these days, potential buyers include Oracle, Microsoft and Wal-Mart. The estimated transaction price is between US$20 billion and US$30 billion.
During the Asian session on Wednesday, the Asia-Pacific stock markets were mixed, following the mixed momentum Wall Street overnight, of which the Dow retraced, while the Nasdaq and S&P both made another new high. So far, the dollar has no obvious rebound as traders were cautious about the coming US economic data announcement. The US consumer confidence tumbled to its lowest level in more than six years, causing pressure to the dollar.
The US data of business activities and home sales are still supportive to the greenback on Monday. The Dollar Index is trading at 93 level in the European session opening despite the return of the risk appetite. Investors are questioning whether additional monetary easing is needed or not for maintaining the economic recovery. The answer may be revealed this week after Powell’s speech at Jackson Hole on Thursday.
Another key focus was the tension between China and the US. Trump’s administration declined to acknowledge claims by China’s commerce ministry that the officials of both countries will review the phase-one trade deal in the coming days.