The dollar slips further to start the session
Of course, things have changed a lot since then, with Biden now moving closer to victory.
But since the dollar surge, buyers have failed to maintain their gains and we are slowly seeing other major currencies recover the movement for the most part.
EUR / USD now holds a little higher on the session, trading at 1.1740 levels after breaking its 200 hour MA (blue line) earlier. As a result, buyers are now in control of the pair for the short term although there is some resistance around 1.1742 at the moment.
AUD / USD also cut past losses from 0.7165 to 0.7185. Meanwhile, USD / CAD is also pulling back to lows this week, closer to 1.3000-10.
The weak dollar comes on the back of a continued rally in the equity space with S&P 500 futures now up 1.2% and Nasdaq futures up 2.1%.
While equity investors seem more confident of a course of risk, the bond market is less confident with 10-year Treasury yields down 3.5bp to 0.727% – the lowest in nearly 3 weeks.
The stimulus story seems to be what is driving the bond market right now, but there are still a lot of question marks the market has to face.
- Much of the dollar’s push to the bottom is due to the election result approaching its endgame with Biden looking for a favorite now?
- Is the market underestimating the potential risks of a divided Congress?
- Or is the market happy that this is the “right” kind of blockage in Washington?
- What about the chances that the election result will be contested and delayed longer?
- What about the focus on the virus and how it is still eating into the economy?
- Or is the central bank printing press sufficient to overcome all of this?