USD: Election and FOMC meeting pose key tests for dollar’s rebound – MUFG


Analysts at MUFG Bank, point out that the stronger US growth figures and fiscal stimulus optimism are helping to lift US yields and encouraging a stronger US dollar. They warn that the US election outcome and the Federal Reserve meeting should help to dampen greenback’s rebound.

Key Quotes:

“The USD has been rebounding ahead of next week’s US Presidential election. It has helped lift the dollar index back towards the top of its recent trading range between the 92.000 and 94.000. The USD’s upward momentum has been mainly driven by negative developments overseas rather than any material reassessment of the likely outcome from the US Presidential election. The re-imposition of a national lockdown in France has triggered a sharp correction lower for risk assets and helped to boost the safe haven appeal of the USD. There is a heightened risk other countries in Europe will follow France’s lead. At the same time, the US economy has been and is expected to be less negatively impacted by the second and third waves of COVID.”

“Assuming there is no significant surprise in the Presidential race, the initial market reaction is likely to be driven more by whether the Democrats are able to take control of the Senate as well. A Blue Wave would be the most supportive outcome for risk assets encouraging speculation over even bigger fiscal stimulus plans and improving global trade relations. It would provide a shot in the arm for high beta currencies especially Asian, emerging and commodity-related currencies with the exception of the rouble.”

“Our forecast for USD weakness against the majors in the year ahead is built on the assumption the Fed will step up QE.”

“A shock Trump victory and/or the Republicans maintaining control of the Senate will likely be required to reinforce the USD’s upward momentum in the week ahead.”

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.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

AUD/USD sits at two-month highs near 0.7375

AUD/USD keeps its range near two-month highs of 0.7375 despite a big miss on the Australian Q3 Capex data. The bulls retain control as the US dollar remains on the back foot across the board, in the face of renewed US economic growth concerns. 

AUD/USD News

USD/JPY revisits Wednesday's low as weak US data keeps dollar under pressure

USD/JPY drops over 20 pips in Asia to test Wednesday's low. USD/JPY is feeling the pull of gravity with the dollar drawing offers, possibly on disappointing US data released Wednesday. Disappointing US jobs data and dovish Fed minutes weigh over the dollar.

USD/JPY News

Gold hovers within the range of Wednesday's Doji candle

Gold's daily chart shows signs of indecision in the market. Wed's high and low are levels to beat for bulls and bears, respectively. A Doji candle represents indecision in the market and makes the following day's close pivotal.

Gold news

Markets return to normal, and traders may be loving it

Calendar comeback – currencies begin moving to the tune of economic indicators, a welcome return for traders. Valeria Bednarik, Joseph Trevisani, and Yohay Elam discuss the latest market moves and what to expect in the final stretch of 2020 and beyond.

Read more

Black Friday 2020 Discounts!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info

Forex MAJORS

Cryptocurrencies

Signatures