USD remains range-bound for now as the DXY index is trading toward the top of the 92.000-94.000 range that has held for most of the period since toward the end of July. There are now so many macro factors for market participants to focus on it is no wonder that FX markets remain mostly within recent ranges, according to economists at MUFG Bank.
Key quotes
“We see little change in the two biggest negatives for market sentiment at the moment. The first is the significant re-escalation of COVID-19 in Europe and some signs of re-escalation in the US as well .The second is the failure in the US to reach a deal on a fiscal stimulus package ahead of the election. President Trump is holding out hope, stating on Thursday he is willing to go above the Republican limit of $1.8 trillion while US Treasury Secretary Mnuchin stated Trump could persuade Senate Republicans to support a bigger package. We and the financial markets remain sceptical.”
“The markets for now remain half-hearted in its conviction on reducing risk. This makes sense for now given the large-scale fiscal stimulus likely in 2021. What that means for inflation and the US deficit outlook point to the strong need for a weaker US dollar in order for these large-scale deficits to be financed going forward.”
“There are two natural market adjustment mechanisms for higher levels of capital requirements in the US – higher rates or a weaker US dollar. We are betting on the Fed following through with its commitment to cap rates, leaving the US dollar as the only viable adjustment mechanism for financing record deficits going forward.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.