There was little activity in the financial markets on Wednesday, with the major pairs mostly consolidating and stocks fluctuating between gains and losses.
Market sentiment remained trapped between fears of coronavirus outbreaks and hopes for vaccines. The U.S. health care system is under strain as new cases continue to rise and numerous restrictive measures have been announced across the country. The latter is that the number of new infections in New York has reached a level where local authorities can close schools.
US President Donald Trump continued to use social media to talk about election fraud. Nevertheless, the demands put forward so far have practically not been ignored, and some of them have been rejected. Political instability is adding to the pressure on the dollar, even though Joe Biden is likely to become the 46th US president.
The previous meeting of the Federal Reserve System did not have many consequences for the foreign exchange market, since during the US elections the concentration was elsewhere. The next Fed meeting will be crucial for the markets given the elusive fiscal stimulus package, and we may very soon see a shift towards quantitative easing.
Powell’s focus on COVID and the need for additional financial stimulus underscores some of the tactical concerns surrounding the weaker US dollar being chased from current levels.
Inflation rates are an important indicator of economic activity or lack thereof. Inflation in the UK in October rose from 0.5% to 0.7%. This exceeds the generally accepted forecast of 0.5 percent, and satisfied investors appreciated the pound. The currency has gained about 1% this week and is approaching a 10-week high of 1.3313.
The core consumer price index showed the same trend: growth was 1.5% compared to the previous value of 1.3%. This figure surpassed the 1.3% estimate.
As for Brexit, EU Trade Commissioner Valdis Dombrovskis said that they are now at the last moment to conclude a trade deal with the UK. Besides, UK business secretary Alok Sharma said there was “more to do” regarding Brexit, adding that the EU “must understand” that the UK is a sovereign country. However, investors are still hoping that the UK and the EU will strike a trade deal.
Crude oil prices maintained their positive tone and demonstrated moderate intraday gains, with WTI at around $ 42 a barrel at the end of the day. On the other hand, gold prices declined slightly, amounting to about $ 1,874 per troy ounce.
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