The US dollar continues to be supported by the entire currency market, which is due to investors' carefulness before the US presidential election and the second wave of COVID-19.
The details regarding the importance of these main factors and their qualitative impact on the dynamics of world markets in general and currency market in particular were already mentioned before. As a result, we will just recall their contents today.
The impact of the presidential election results is based on the uncertainty factor of who will win it – either Mr. Biden or Mr. Trump. Here, we should observe how the losing side will behave, whether an act of defiance or not will begin. It is already known that supporters of both Biden and Trump express great determination to resist after the election, if their candidate does not win, which can lead not only to street riots, but also to a military confrontation with the risk of developing into a civil war. In any case, this probability is considered by many authoritative political experts. In such circumstances, investors are very cautious and reduce their presence in risky assets, buying the dollar as a safe haven currency.
Now, the second reason is the impact of the COVID-19 pandemic. The second wave that began this fall has already caused a partial closure of the economies of European countries. In view of this, France and Germany have already taken these measures, and the United Kingdom has joined them today. The economies of these countries continue to suffer from low economic activity, which will decline even more against the background of the resumption of quarantine measures, which will hinder its growth, albeit limited.
Thus, we believe that these two factors will continue to support the US dollar rate today, putting pressure on the demand for risky assets, primarily company shares.
This week will be filled with events that will certainly affect the dynamics of financial markets. This is the US presidential election on November 3, Fed's monetary policy meeting and its results, which will be known on Thursday, and, of course, the publication of latest employment data in the US.
Forecast of the day:
The EUR/USD pair remains under pressure. So, it is very likely that it will continue to decline first to the level of 1.1615, and then to 1.1600.
The GBP/USD may decline to 1.2855 after overcoming the level of 1.2895 amid the UK government's decision to introduce quarantine measures in the country to limit the spread of COVID-19.
The material has been provided by InstaForex Company - www.instaforex.com