However, it is not really positive as the UK officials said this is just “agreement in principle”. The trade deal is not yet reached. Boris Johnson also warned that the Hard Brexit is still possible and he will just quit any further negotiation if no deal. Watching the GBP/USD trend, it is clearly that traders are still very cautious over the two “talks” above.
The dollar index dropped to 91.7 level on Monday, following the recent downtrend since November, declining from above 94 level. The dollar keeps testing a more than two-year low, that mainly driven by the vaccine optimism and the easing policies expectations of the US side.
On Monday, Asian stock markets are all trading higher as investors are optimistic towards the deal of 15 economies in the region that formed the largest trade alliance in the world. The trade deal, called “The Regional Comprehensive Economic Partnership, RCEP”, is to mainly reduce tariffs across many areas.
On Wednesday, the Wall Street was mixed, while the Dow fell just 23 points, but the Nasdaq bounced back 2% from the recent weakness. So, tech stocks on Thursday were good after the rebound overnight stateside. However, the stock markets are still struggling, waiting for further hints leading the direction.
On Friday, investors are cautious watching the final results from the US election, even the early birds have already bet on Biden’s win these two days. Based on the latest record, Biden has racked up 253 electoral votes, closed to the White House. Few battleground states such as Arizona and Pennsylvania are the focus so far, and the prediction is favored to Biden side.
In FX market, the performance of the greenback was mixed as well. Hopes on the relief bill lowered the safe-haven demand in the market while those riskier currencies like Aussie was favored with such situation, bouncing to 0.7130 level above. On the other hand, the talk of the EU-UK deal was still uncertain, weighing on sentiment over the Euro and Sterling.
Overall, market sentiment is cautious. Traders are reviewing the risks over those issues like the UK-EU talks, the rapid spread of coronavirus, and the progress toward the US stimulus. The dollar strengthened as investors are seeking the haven currency. Dollar index hit 93.9 last night. Countries in Europe are now reimplementing lockdown measures to tackle with the surging coronavirus cases, hurting the sentiment over Sterling and Euro.
Last week, the whole market was dominated by the news surrounding the Congress and relief bill in the US. Trump suddenly stopped the negotiation, causing the drop of the markets last Tuesday, but resumed it quickly. Up to now, the White House may propose a $1.8 trillion plan, which is more likely to make the deal with the Democrats. However, some Republicans are concerning about the nation’s debt and this offer may be unfavored to the coming presidential election.
Global markets reacted well after the news. All three major indexes of Wall Street bounced around 1.6%-2.3%. The dollar, which was deemed as the “only” safe-haven recently, was weaker against those riskier currencies on Monday. At least, the return of Trump has lowered the political uncertainties in the short term.
In the coming days, political uncertainties will keep investors on guard. Only very few traders will now expect the US Congress will make any deal regarding the stimulus package, especially before the election. On the other hand, investors now also are looking forward to the first “Presidential Debate” on Tuesday, which may contribute to one of the most significant drivers of the whole financial market in October.