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Daily market commentary: The greenback is under renewed pressure



FOREX

The US dollar is losing ground to other major currencies during the early part of Wednesday’s session. The greenback is under renewed pressure as the results of the runoff US Senate elections in Georgia appear to be swinging towards the two Democrat candidates. Should the Republican party lose the two seats, it will also lose the Senate majority and the capability to systematically block President-elect Joe Biden’s planned comprehensive stimulus programs and general legislative agenda. In such a scenario, the dollar decline can be interpreted as a sign that the markets see a Democrat-controlled Senate as favourable for the global economic recovery, which in turn will favour the flight from the safe haven greenback and lead to investments in riskier assets.

Ricardo Evangelista – Senior Analyst, ActivTrades

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OIL 

The oil price is rebounding on the unexpected outcome of the OPEC+ meeting. The real surprise was Saudi Arabia announcing a voluntary cut of 1 million barrels a day that will be put in place over the next two months. The market reaction showed enthusiasm for the decision, with oil jumping by 5% to bring the WTI price close to the $50 mark. Today’s early trading is showing resilience, with the price holding on to the levels achieved yesterday. From a technical point of view, the price has reached a new 8-month-high, confirming the bullish trend of the last few weeks. Investors are still betting on further recoveries of the barrel once the coronavirus restrictions are reduced.

Carlo Alberto De Casa – Chief analyst, ActivTrades

EUROPEAN SHARES 

Risk assets ticked slightly higher at the market open on Tuesday, despite thinner volumes, as market sentiment remains sustained by hopes of further stimulus in the US. Most equity traders around the world welcomed the US Democrat victory for the control of the US Senate this morning as it sparked hope that this new “blue wave” could bring further regulation, tax hikes and, more importantly, further fiscal aid. These hopes are having a strong impact on market sentiment and specifically on cyclical assets as more and more investors, already in the future, are pricing in the economic recovery and the return of inflation. This renewed appetite towards these sectors may even offset the potential dip for tech shares this year after such a strong rally in 2020. Some investors, worried about valuation issues and possible bubbles in the tech markets may choose to use this sector as a “defensive” move this year while cyclical, energy and more generally industrial shares could be the top performers if economies successfully shake off the negative effects of Covid-19.

Pierre Veyret– Technical analyst, ActivTrades


Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.

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Daily market commentary: The greenback is under renewed pressure

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