The recent strength of the dollar reflected risk aversion, under the logic of “Cash is King”. On Tuesday, the dollar index made the technical breakthrough, standing above 94 level. However, driven by the rally of tech stocks, sentiment over the Wall street turned to be a bit positive amid a higher dollar.
But, most of the traders in the markets are not that optimistic as it is still doubtful about the outbreaks, global economic recovery, international tensions, uncertainties over the UK-EU deal, the US election, etc. The whole market may be closely watching whether it is just an oversold reaction or not.
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.
Stocks in Asia-Pacific were mixed on Wednesday as investors are very cautious, digesting all the news surrounding, like the comments from Powell. The UK-EU trade deal would be one of the market drivers, as it is reported that the UK will pass the controversial “Internal Market Bill” next week. The EU has reacted strongly over these days and reiterated the consideration of legal actions. Any “Hard” Brexit possibility would weigh on the Sterling and the Euro in medium-long term, pushing the dollar up.
Of course, escalating US-China tensions is even more dominated. The TikTok transaction is turning down, based on the attitude of both sides so far. The confrontation between China and the US at the UN General Assembly shows that, it is too difficult for the two powers to normalize their relations in the foreseeable future.
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