The EU has warned the UK that the bill would hurt the trade deal ahead, and the EU will prepare for the worst, letting UK to leave without any deal. The Sterling bounced back to 1.29 level against dollar on Monday US session, but dropped back to 1.2850 area for closing. Despite improved risk appetite and the slip of dollar, Sterling is clearly bearish. The dollar index broke 93 mark again on Tuesday earlier trading session.
In FX, the dollar was steadied on Friday earlier session, after a volatile move overnight. The latest policy direction from ECB boosted the euro up to 1.1917, weakening the dollar in the US trading session. But, the tumble of the US stocks sparked risk aversion, triggering a rebound of the dollar against the major currencies.
Still, the market focused on President Trump as he once again raised the idea of “decoupling”, saying that the US may separate its economy with China, meaning no more business between both countries, the world’s two biggest economies.
There are different interpretations for the market crash. Most of the analysis believe that “overvaluation” would be the main reason. Investors may be doubtful about the sustainability of those high price stocks. On the other hand, before the Non-Farm payrolls on Friday, investors may book the profit, triggering such big move. In addition, negotiations of the new stimulus package between the White House and the Democratic Party have no progress at all, sparking concerns over the lack of fiscal policy.
The latest news is that TikTok has selected a potential buyer already, and the transaction involves the company’s business in the US, New Zealand and Australia. The result will be announced as soon as Tuesday. Based on information over these days, potential buyers include Oracle, Microsoft and Wal-Mart. The estimated transaction price is between US$20 billion and US$30 billion.
During the Asian session on Wednesday, the Asia-Pacific stock markets were mixed, following the mixed momentum Wall Street overnight, of which the Dow retraced, while the Nasdaq and S&P both made another new high. So far, the dollar has no obvious rebound as traders were cautious about the coming US economic data announcement. The US consumer confidence tumbled to its lowest level in more than six years, causing pressure to the dollar.
The US data of business activities and home sales are still supportive to the greenback on Monday. The Dollar Index is trading at 93 level in the European session opening despite the return of the risk appetite. Investors are questioning whether additional monetary easing is needed or not for maintaining the economic recovery. The answer may be revealed this week after Powell’s speech at Jackson Hole on Thursday.
Another key focus was the tension between China and the US. Trump’s administration declined to acknowledge claims by China’s commerce ministry that the officials of both countries will review the phase-one trade deal in the coming days.
The Dow and the S&P 500 were good in the early US trading session on Tuesday. However, the three major Wall Street indexes eventually all fell, of which the Nasdaq dropped the most, nearly 1.7%. The gold market experienced a crash-like drop, which was a significant adjustment under the risk aversion condition.
The whole financial market temporarily stabilized a bit on Thursday as it is reported that the US banking regulators are about to ease restrictions from the Volcker Rule, boosting the Wall street. Despite the fears of surging new coronavirus cases, risk appetite came back in the stock markets.