15.10.2020: USD holding upper hand amid flight to safety (DJIA, USDX, USD/CAD)
The US stocks are trading lower today. Analysts at Goldman Sachs foresee a negative dynamic of hi-tech shares. The US dollar is gaining traction. The pound sterling is sensitive to twists in the Brexit saga. The Canadian dollar is losing ground.
Futures on the benchmark stock indexes are trading in the red amid fading hopes for the US stimulus measures. Another headwind for US stocks is a threat of new lockdown measures in Europe which casts a shadow over the global economic recovery.
Futures on the S&P 500 are 1.1% down. The index of the broad profile companies is extending weakness for the third straight day. The pan-European Stoxx Europe 600 tumbled 2.2%. Most Asian indexes closed today with losses. The US equity market is trading steadily this week. Investors are evaluating a series of risk factors, including uncertainty over the outcome of the presidential election and the talks on the government stimulus package. Besides, the second pandemic wave and availability of the COVID-19 vaccine and treatment are also to blame for the overall market pessimism. Bearing such uncertainty in mind, market participants are in the wait-and-see mood.
Goldman Sachs experts warn that the hi-tech stocks could lose the lead in the US stock market. They believe that shares of hi-tech companies will lag behind shares of major banks and car manufacturers. Despite much stronger earnings after a slump in March, hi-tech shares are losing popularity. There are some reasons that could give a boost to shares of banks and auto makers. Yields of US Treasuries are on the rise. Investors expect at least one vaccine to be approved this year. Another reason is the prospects that the Democrats could gain control over the White House and the Senate.
Goldman Sachs predict large-scale changes both in the politics and the economy which will entail a shift of priorities among investors. The banking sector is the most vulnerable to interest rates and economic growth.
On Wednesday, the US dollar slipped across the board, except the Canadian dollar. In the early European trade today, the greenback regained footing amid a flight to safety due to increasing coronavirus rates. US lawmakers are poised to cancel the stimulus bill until the election. The US dollar index made a 0.1% uptick to trade at 93.483. The euro/dollar pair is 0.1% down at 1.1740. The dollar/yen pair edged up 0.1% to 105.28. The risk-exposed Australian dollar sank 0.7% to a one-week low of 0.7110 in light of hints from the Australian central bank’s governor about a rate cut or bond buying.
The French government announced the red alert in the public healthcare due to rampant infection cases.
US Treasury Secretary Stephen Mnuchin stated that he is unable to come to terms with House Speaker Nancy Pelosi about the stimulus bill. The gridlock in Congress has been supporting the US dollar for a few weeks raising demand for safe haven assets.
The pound/dollar pair is trading steadily at near 1.3006 as investors are anticipating that the EU and the UK will extend the Brexit talks beyond the deadline in mid-October. The parties need more time to settle some thorny issues which are obstacles to a trade deal. The EU authorities are holding the Brexit summit tonight.
The US dollar spiked up to a 1-week high of 1.3207 against the loonie.
Three weeks are left before the presidential election in the US. A wave of selling hits the US stock market. The panic mood is spreading also across the currency market. Investors are braced for the most dramatic presidential race in the modern history. Even despite the growing lead of Joe Biden in the recent polls, investors are unwilling to make hasty conclusions, recalling events of 2016. Hillary Clinton was holding the upper hand in the primaries but lost the election.
This week, two pharmaceutical companies cancelled trials of the COVID-19 vaccine because patients had fallen sick.
Tonight, traders are alert to initial unemployment claims in the US and a report by the Federal Reserve Bank of Philadelphia.
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