Forex Update, Tuesday, 29th of September, 2020
Faced with a strong US Dollar on safe-haven demand and fears of a second wave of the coronavirus pandemic washing across Europe, the outlook for EUR/USD remains bearish even after its steep recent losses. The ECB has made it clear that its focus is on inflation so any improvement in Septembers data out this week could help the euro bounce from its current decline
The US Dollar may be at the mercy of political volatility and ongoing stimulus talks. this week. With Greater election-related uncertainty, concern about timely aid package could hurt sentiment. Also, as the FED focus’s now on improving Jobs' data, this week's NFP results could be pivotal in determining the overall state of the US economy.
The Australian Dollar is at risk of extending its retreat from the yearly high set on September 1 ahead of the Reserve Bank of Australia’s interest rate decision on October 6, despite the planned easing of coronavirus restrictions in Melbourne – Australia’s second-largest city. With Growing expectations that the RBA will cut rates in October, a decision to do could add move downward pressure to the AUD.
It’s been another turbulent week for the Pound with the currency falling 1.6% against the greenback. With that said trade negotiations between the EU and the UK are starting to show subtle signs of progress. UK press reports surrounding this week’s informal talks ahead of the ninth round of negotiations next week have provided a sense of cautious optimism that a no-deal will be avoided. Further downside risks regarding renewed lockdown measures and Brexit uncertainty appear largely priced in now and thus a significant extension appears limited with the absence of a breakdown in Brexit talks.
Gold prices fell the most since August last week despite further losses in the S&P500. The yellow metal has struggled in an environment where the US Dollar was rising, and risk aversion placed a greater premium for liquidity. All eyes this week however turn to the US non-farm payrolls report. Data out of the world’s largest economy continues to outperform economists’ expectations, but this has been by a narrowing margin since the middle of July. Markets are forward-looking, persistent threat over the timeliness of a fiscal package could cast a shadow of doubt over swift economic recovery expectations, undermining another solid NFP report.
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