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Currencies Tumble As Trump Pulls Plug On Stimulus Talks

By Kathy LienForexOct 06, 2020 04:48PM ET
www.investing.com/analysis/currencies-tumble-as-trump-pulls-plug-on-stimulus-talks-200540135
Currencies Tumble As Trump Pulls Plug On Stimulus Talks
By Kathy Lien   |  Oct 06, 2020 04:48PM ET
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Late Tuesday, U.S. President Donald Trump pulled the plug on stimulus talks, sending currencies and equities sharply lower. He instructed his staff to stop negotiating until after the election, which means unemployed Americans and struggling businesses won't receive any more help until December at the earliest. This unexpected announcement killed rallies in EUR/USD and USD/JPY and could spark the beginning of a deeper contraction in risk appetite.  Even when Trump was admitted to the hospital due to COVID-19, the prospect of a fiscal stimulus deal kept financial markets supported. By taking away this hope, Trump is giving investors a strong reason to square up ahead of the November election. It's always a possibility that he’ll change his mind in a week or two, but for now, we expect further losses in equities and currencies. This announcement could confirm a top at the 50-day SMA for USD/JPY, which is currently near 105.75. That aside, the greenback caught a safe-haven bid, rising against all other major currencies.
 
U.S. data mattered little on a day focused on headline risk as the trade deficit widened. Federal Reserve Chairman Jay Powell also spoke this morning and he reaffirmed the central bank’s low rates for long bias. As Cleveland Fed Loretta Mester said yesterday, nothing needs to be done right now, but the central bank could lengthen the maturity of bond purchases if necessary. Fed President James Bullard agrees that bond purchases would be the way to go. There are no other U.S. economic reports scheduled for release tomorrow beyond the FOMC minutes. The Federal Reserve made its position very clear last month. With inflation running below target and unemployment at historically high levels, there are no plans to raise interest rates for the next three years. In fact, two out of nine policy-makers wanted the Fed to use stronger language to describe their commitment to low interest rates. The FOMC minutes are widely expected to reinforce the central bank’s dovish bias, which may be more negative than positive for the greenback.
 
Meanwhile, stronger-than-expected German factory orders drove the euro higher prior to Trump’s announcement. EUR/USD rose above 1.18 for the first time in two weeks before nosediving. German industrial production numbers are scheduled for release tomorrow, and the data should be stronger after today’s report. However, none of that may matter if the market is driven by risk-off flows. Sterling continues to be marked with volatility ahead of tomorrow’s Brexit talks. There are rumors that the EU may call the UK’s bluff and see if it is really willing to leave the union without a trade deal. But, according to “EU sources,” the latest round of talks are the most positive.
 
The Australian dollar sold off the most on the back of weaker trade data. The Reserve Bank left interest rates unchanged and confirmed the need for a highly accommodative policy stance. The Australian government also announced new tax cuts and measures to boost jobs. This will cause the budget deficit to hit a record high, but the government sees no budget recovery without a jobs recovery. Service sector PMI numbers are due for release this evening and a softer release could accelerate the slide in AUD. The Canadian dollar traded lower on the back of weaker trade data. Canada’s IVEY PMI report is scheduled for release tomorrow and will decide if USD/CAD extends it gains past 1.33.  
 
Currencies Tumble As Trump Pulls Plug On Stimulus Talks
 

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Currencies Tumble As Trump Pulls Plug On Stimulus Talks

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Comments (13)
Paul Tan
Paul Tan Oct 07, 2020 6:12AM ET
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Trump is too busy practicing signing on blank paper. lol.
Charles RJ
Charles RJ Oct 07, 2020 5:17AM ET
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thanks kat
Chris Black
ChrisBlackforex Oct 07, 2020 3:08AM ET
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Damn! (TDalt) Sound like Trump.. Knowing well? That money will help poor people & people in need. christmas Around the corner...Trump mess up his Own Elections
Ta Da
TDalt Oct 07, 2020 12:30AM ET
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Love how the Liberal Media spins this. Pelosi wanted to spend hundreds of billions in non-covid needed money for Democrat states. The Republicans said no. Nancy hasn't moved an inch for months on it, shutting down multiple stimulus packages the Republicans brought to the table. She's holding Americans hostage.
henry sijuade
henry sijuade Oct 07, 2020 12:30AM ET
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really demoract states... lol but then why were some republicans OK with the deal until Kim jong trump decided to pull the plug... who the *****holds a country hostage to make sure he gets reelected...Nancy is one of the reasons trump hasn't told you to build a statue of him and change the US dollars sign to Trump sign, He is aware that should that stimulus package pass, The democrats will want to take the glory
Jesse Mulliniks
Jesse Mulliniks Oct 06, 2020 10:49PM ET
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Is america great again?
Jose Cadaveira
Jose Cadaveira Oct 06, 2020 10:49PM ET
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is becoming china
Sumit Goyanka
Sumit Goyanka Oct 06, 2020 10:46PM ET
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awesome as always
joy city
joy city Oct 06, 2020 8:17PM ET
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last month of stock manipulations for personal gain before heading out the door.
Juan Jones Ortiz
Juan Jones Ortiz Oct 06, 2020 8:00PM ET
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awesome as always!
Bruce Gunnell
Bruce Gunnell Oct 06, 2020 7:15PM ET
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what it means no check for you
De Al
De Al Oct 06, 2020 5:38PM ET
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Silly headline
asif ahmadi
asif ahmadi Oct 06, 2020 5:36PM ET
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Will it go down now or up?🧐
Jack Galloway
Jack Galloway Oct 06, 2020 5:02PM ET
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What about Cable?
Paul Sutton
paulsmith007 Oct 06, 2020 4:56PM ET
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The bears will rip the bulls apart now.
Gabriel Gonzalez
Gabriel Gonzalez Oct 06, 2020 4:56PM ET
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Lol
 
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