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02.10.202014:39 Forex Analysis & Reviews: Wait and hope or wait and worry: Forex is covered by a wave of volatility

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Exchange Rates 02.10.2020 analysis

Reports that US President Donald Trump has tested positive for the coronavirus have triggered a new wave of volatility in the markets and spurred demand for defensive assets.

Greenback gained about 0.6% against the risk-sensitive Australian namesake. The yen showed the steepest jump in more than a month. Despite such growth, the USD / JPY pair has fallen by almost 0.5%, reaching a weekly low near 104.95.

"The results of Trump's coronavirus test fuel rumors that Joe Biden will lead the presidential race, and provoke the growth of the yen and the dollar," strategists at Mizuho Securities said.

Risk sentiment was also undermined by the fact that the promotion of the next fiscal stimulus package stalled in Washington.

House Speaker Nancy Pelosi and US Treasury Secretary Stephen Mnuchin have so far failed to bridge differences over the size of the aid package.

"Wait and hope or wait and worry - market sentiment fluctuates between these two states," said Bank of Singapore.

Reports of Trump's health have supported the dollar as a safe haven asset ahead of the U.S. employment report. However, the greenback may suffer if US labor market data disappoint, showing slower job creation in September.

Exchange Rates 02.10.2020 analysis

The main currency pair is stuck in a flat at 1.1700-1.1770.

The chances of additional easing of monetary policy by the ECB are growing in response to the increased risks of a slowdown in the pace of economic recovery in the EU. In addition, uncertainty about the agreed European economic assistance fund has increased.

Analysts at Commerzbank said, "Lingering divisions within the EU heighten fears that the fund will not be ready to roll out as planned on January 1."

"This could weaken the euro and limit its upside, at least until it becomes clear that the fund is finally ratified," they added.

Meanwhile, GBP / USD continues to serve as a barometer of sentiment around Brexit. The pair fluctuated between 1.2820 and 1.2980 on Thursday, depending on the news that came out.

The pound collapsed after the EU notified the United Kingdom of the possibility of filing a legal action in case London does not amend the pending internal market bill. Then upon the reports of a possible compromise between the parties on government aid, the pound sterling immediately jumped. However, a few hours later, an EU official denied reaching an agreement.

The likelihood of a trade deal between London and Brussels is currently estimated at 50/50. Therefore, further volatility of the GBP / USD pair should not be surprising. It is expected to continue trading between 1.2700 and 1.3000 in the coming weeks.

Eseguito da Viktor Isakov
Esperto analista di InstaForex
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