As expected, the market was already done with the topic about the possibility of new incentives in the US, following the presidential election on November 3. Thus, the issue of COVID-19 is noticeable again. Its second wave hinders the full recovery of economic activity not only in individual countries, but also in entire regions.
The decline in demand for risky assets in view of the pandemic and corporate reporting of companies for the 3rd quarter provides support for the US dollar, although it should be recognized that it is not universal. The USD is rising against commodity and commodity currencies, as well as against the yen, but is declining against the franc, euro and pound. But if you look closely at the overall dynamics in the main currency pairs, you can see that they are moving in sideways ranges differently, which is confirmed only by the behavior of the ICE dollar index.
Meanwhile, interesting economic statistics began to appear, while investors are watching the pre-election battles in the US, the situation around COVID-19, as well as the slow down of vaccine trials against this infection. Yesterday, US manufacturing inflation data came out, which unexpectedly increased more than what was expected. The producer price index soared by 0.4% against the forecasted growth of 0.2% in annual and monthly terms. At the same time, the core PPI on an annual basis rose by 1.2% in September against 0.6% a year earlier and the forecasted 0.9%.
This data is an important signal to the market. If the overall growth dynamics of this indicator continues, then it will certainly have a strong impact on the growth of consumer inflation, which will force the Fed to think about the need for such a soft monetary policy in the future. Today, investors will closely monitor the emerging values of the number of applications for unemployment benefits and the production figures from the Federal Reserve Bank of Philadelphia in America.
Assessing the overall situation on the markets, we believe that the general sideways trend may continue before this month ends.
Forecast of the day:
The AUD/USD pair continues to decline in the wake of China's inflation data, despite the more positive values for employment in Australia. Against this background, the pair may fall first to 0.7100, and then to 0.7075.
The NZD/USD pair also has prospects for falling to 0.6570 after breaking through the level of 0.6630.