The U.S. dollar and other safe-haven currencies struggled to move on Tuesday as investors held back ahead of next week’s U.S. election outcome.
Prices were not moving much because of a reluctance to build positions in the run-up to the U.S. Presidential election. Αn uncertain election outcome could force drastic unwinding of positions similar to what occurred in 2016.
A week out from the U.S. election, national polls give Democrat Joe Biden a solid lead οφ 7.9 περψενταγε ποιντσ. But the contest is much tighter in battleground states that could decide the outcome. U.S. President Donald Trump, facing a tough re-election battle on Nov. 3, lashed out again at reports that the coronavirus is surging.
Further, analysts warned investors were clearly cautious about a tidal wave of new COVID-19 cases forcing some countries to impose new curbs. The US, Russia and France hit new daily records for coronavirus infections.
Governments have been desperate to avoid the lockdowns at the cost of shutting down their entire economies. The gloom weighed on global financial markets on Monday as surging infections clouded the economic outlook. U.S. stocks had their worst day in four weeks over the double whammy of record coronavirus cases.
News that a vaccine being developed produced immune responses in both elderly and young people offered some positive news.
The European Central Bank meets on Thursday. However, analysts are not expecting any fireworks and say market reaction will be limited.
START TRADINGForex – Next week’s US election outcome propels markets
Exchange market activity has remained relatively muted, with price moves in early Tuesday limited.
The dollar index, which measures the greenback against a basket of currencies, edged slightly lower to 92.959. Analysts regard a Biden victory, and especially Democrat control of the Senate, as negative for the dollar. Big stimulus spending would boost investor sentiment and drive demand for riskier currencies.
The yen and the Swiss franc were mixed, with the yen higher but the franc falling slightly.
The usually risk-sensitive Australian and New Zealand dollars traded higher.
After initially falling, the euro was up 0.1% by 1130 GMT to $1.1818.
Sterling rose only slightly against the euro, however, and fell versus the U.S. dollar. The British pound was flat against both currencies at 90.70 pence and $1.3021 respectively.
Negotiations between Britain and the European Union over a Brexit trade deal continue. Though, analysts say the pound won’t change by much in case of an agreement.
Apart from Brexit, Britain is grappling with a weak economy battered by the coronavirus. Negative interest rates have not been ruled out, another hurdle the currency can ill afford.
Oil prices eked out small gains on Tuesday after recent sharp losses.
Brent crude was up 35 cents, or 0.87%, at $40.81 a barrel, having dropped more than 3% overnight. U.S. oil was up 30 cents, or 0.78%, at $38.86 a barrel, after also declining more than 3% on Monday.
The safe-haven Spot gold added 0.32% to $1,907.64 an ounce.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money