FOREX-Risk aversion is the prevailing sentiment

Risk aversion is the prevailing sentiment for financial markets early on Tuesday, with the main stock indices in Asia and Europe in the red and US futures pointing in the same direction. It is therefore hardly surprising that the dollar has recovered some of the ground lost over the last few days, after hitting a 3-week low versus other major currencies on Monday. The greenback’s gains versus risk-related currencies result from a setback in the development of a Covid vaccine by Johnson & Johnson, the continued stand-off between bipartisan lawmakers in Washington preventing the approval of an economic stimulus package plus a new addition to the party in the shape of a fresh dose of Chinese assertiveness banning the import of several key commodities from Australia. The latter factor reminds us that the latent trade and tech conflict between the Asian giant and Western economies continues to cast a shadow over global economic growth perspectives.

GOLD-Investors are waiting for new market movers

Gold is consolidating after Friday afternoon’s sharp rally with investors waiting for new market movers. Although this could be a crucial week for Brexit, this doesn’t seem to be an important issue for bullion with news from central banks and US politics much more likely to trigger movements. We are in a wait and see scenario, as investors try to understand what is going to happen in early November with the US election and the subsequent reaction of both stocks and currency markets. Technically gold is regaining strength with the consolidation above $1,920 a supportive signal for bullion and confirming traders’ huge interest.

FOREX-Investors are now pausing

The Dollar Index remains flat as trading gets underway this week after dropping more than 0.5% during Friday. Investors are now pausing to see how negotiations for a stimulus package unfold in Washington. Last week's losses resulted from increasing hopes of an agreement between Democrats and Republicans that would allow the release of the much-needed funds. Such a scenario is positive for the country’s future economic prospects and diminishes demand for safe havens, with the dollar’s appeal waning as a result.

EUROPEAN SHARES-A new US stimulus package continues to sustain market sentiment.

European equities traded higher on Thursday, alongside Asian benchmarks and Futures on the S&P 500, as optimism about a new US stimulus package continues to sustain market sentiment. Investors’ risk appetite continues to grow as US lawmakers move closer to a new deal, while yesterday’s minutes from the last FOMC meeting also showed further support from US central bankers may also be on its way and this is helping to drive stocks higher everywhere. It is interesting to note that while the EU already successfully reassured investors by providing an unprecedented fiscal and monetary stimulus response earlier this year, most EU stock traders are focusing solely on the latest developments in the US, despite record infection numbers being registered on the old continent (France, Italy and Spain). Increased market volatility is expected this afternoon as the ECB’s Monetary Policy Statement as well as the Initial Jobless Claims data in the US loom. Today’s best performances come from Madrid with financial and energy shares leading the IBEX-35 Index higher, inside its major resistance zone around the crucial 7,000pts level.

GOLD-Continuing a slow dance just above $1,890

Gold is slightly up in the early trading, while volatility remains low. The spot price was unable to surpass the first key level of $1,895, continuing a slow dance just above $1,890. It seems investors are in a wait and see mode as they are still hoping for new stimulus from central banks to help the economy’s recovery. Meanwhile, they are carefully following US politics and the approaching presidential election in early November, trying to predict what impact it will have on US monetary policy and consequently on the US dollar and the gold price.

From a technical point of view, bullion remains in a lateral trading range between $1,850 and $2,070, waiting for a clear new direction.

FOREX-Investors await the speeches of ECB officials

Early Thursday trading started under the spell of continued risk appetite, with the depreciation of the safe haven dollar reflecting the sentiment of investors, whose mood lifted after the US President backtracked on his intention to postpone the approval of an economic stimulus package. With global stocks on the rise, the euro would normally be one of the beneficiaries of the current risk-on stance, but today the single currency’s performance is subdued relative to the dollar as investors await the speeches of ECB officials during the day, who in the past, under similar circumstances, have attempted to talk-down euro strength.