Stock markets are broadly in the red as the week comes to an end, and in FX markets the dollar’s resurgence is likely to be short-lived.

  • Stocks drop back despite solid tech earnings
  • US virus outlook remains difficult
  • Dollar stages a brief recovery

Markets have reversed course on the final day of the week, with early gains for indices on both sides of the Atlantic being given back. While the Nasdaq has remained strong thanks to the bumper crop of earnings from Big Tech last night, other earnings reports have not been as positive, putting pressure on the broader market. To add to this, the UK’s move away from further easing of lockdowns and yet more bad GDP data from around the globe have also put bullish sentiment on the back foot, and further reduced the desire to move back into stocks at month end. A tough August seems to beckon for stock markets, with a flat performance perhaps the best that investors can hope for. US virus cases continue to rise too, as Florida reports a rise in deaths for the fourth consecutive day. Europe going back into lockdown would be bad enough, but the US doesn’t seem to be anywhere ending its first set of restrictions.

A brief rebound in the dollar seems to set the greenback up nicely for further declines next week, while Eurodollar seems poised to start the new week with gains. It looks like the worsening outlook in the US and the perhaps more optimistic one for other parts of the globe continues to provide the driving force behind the dollar’s fall, and political considerations will only rise from here.

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