The US dollar will continue to rally in the currency markets against all major currencies except the Japanese yen.

Last week, the dollar received noticeable support following the Fed meeting and according to the market, it increased the chances of rising interest rates by the US regulator earlier than expected. However, as the effect of this factor began to weaken, it was helped by a collapse in the US stock market, supported by the uncertainty of the results of the presidential election in America, the creation of a vaccine against COVID-19 and the increasing cases in the country. But it didn't end there, the British authorities made a signal yesterday that they might re-introduce quarantine to the country due to the risk of a second wave of pandemic. This shocked the financial markets, causing a wave of demand for safe-haven currencies, in particular the Japanese yen and the US dollar.

On the other hand, Fed's members actively commented on the prospects for the monetary policy of the US Central Bank, making it clear that it will remain stimulating as long as necessary. But this did not help, as investors remember the consequences of the last quarantine measures and tried to get rid of risky assets in advance.

But J. Powell reiterated that the Fed will take all measures to support the recovery of the country's economy in his speech to Congress yesterday. He explained that the economy is showing improvement, but added that there is also a factor of uncertainty about its prospects. Today, he will continue his speeches in the committees of the Congress, while his colleagues will also comment on the situation in the country's economy.

Assessing the general picture in the markets, we believe that negative mood will persist as long as the pandemic hangs over the global economy, holding back its recovery and growth. Moreover, the dollar exchange rate will be under local pressure due to an agreement between Republicans and Democrats on support measures for the population promised in the summer. However, there is one important problem that hinders these agreements – the contradicting position of the Democrats to the personality of D. Trump before the presidential election, which will be held on November 4. These contradictions can keep markets on edge and contribute to the continued decline in demand for risky assets while strengthening the dollar and the yen.

Forecast of the day:

The EUR/USD pair is trading at the lower limit of the range 1.1740-1.1915. If it falls below 1.1740, it is likely to continue to the level of 1.1700.

The AUD/USD pair is consolidating at the level of 0.7200. A decline below it will lead prices to fall to the level of 0.7150.