By Peter Nurse
Investing.com - The dollar edged higher in early European trade Friday, with the result of the contentious U.S. presidential election still unknown and the possibility of a legal battle likely to lead to prolonged uncertainty.
At 2:45 AM ET (0745 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 92.537. EUR/USD rose 0.1% to 1.1838, USD/JPY fell 0.1% to 103.44, while the risk sensitive AUD/USD fell 0.2% to 0.7269.
The U.S. presidential battle still remains undecided early Friday, but Democratic candidate Joe Biden has an edge over President Donald Trump, with a few important states still counting votes.
Trump's legal challenges to vote counts in Nevada, Pennsylvania, Georgia and Michigan have so far had no effect.
Trump has also questioned the election’s credibility. “If you count the legal votes, I easily win. If you count the illegal votes, they can try to steal the election from us,” he said late on Thursday, as usual without presenting any evidence.
“FX markets have reacted to news of a much closer U.S. election by selling currencies most exposed to the global recovery story and buying USD and JPY,” said ING analyst Chris Turner, in a research note.
“Certainly, the prospect of at least smaller fiscal stimulus, if not an outright contested election – combined with poor Covid-19 trends – favor more defensive positioning this month.”
Uncertainty about the U.S. economic recovery from the pandemic is also growing, along with the number of Covid-19 cases, with Wednesday’s private payrolls data and Thursday’s initial jobless claims both disappointing. This put the focus squarely on October’s nonfarm payrolls data, due later in the day, which is forecast to show a slight slowdown in job creation.
The Federal Reserve kept its monetary policies unchanged on Thursday, but Chair Jerome Powell stated that more fiscal and monetary support was needed as rising coronavirus cases clouded the outlook for the economic recovery.
Elsewhere, GBP/USD fell 0.1% to 1.3138, edging lower after Thursday’s strong gains on the back of the Bank of England deciding to increase its bond-buying program to try and support the country’s weakening economy.
EU Internal Market Commissioner Thierry Breton said Friday there was only a "50/50" chance that Britain and the European Union will be able to reach a deal over the terms of Britain's exit from the EU.