Brexit and financial incentives in the US

Financial and commodity markets analytics

Market Watch review. 28.09.2020

In today's release, we’ll cover the following topics:

  • A week of difficult Brexit negotiations.
  • ECB quarterly report.
  • US electoral race.
  • Another package of financial incentives in the United States.

Already today Britain and the EU will resume negotiations and judging by the mood of traders, there are more and more optimists. It is too early to speak about the ability of the parties to reach an agreement, however, the activity of the GBP sellers has significantly decreased, thereby indicating that investors believe in the success of these negotiations, which will most likely last until the end of this week.

With the opening of the European trading session, GBP/USD quotes returned above 1.2770. But strong growth should not be counted on until the UK and the EU are able to reach a trade agreement as part of the global Brexit deal. But at the same time, it is important for traders to monitor the mood in the US stock market. After all, its growth will contribute to the weakening of the USD and, as a result, the strengthening of this currency pair.

I would also like to draw your attention to the upcoming speech of the ECB President Christine Lagarde. She will submit a quarterly report to the European Parliament's Committee on Economic and Monetary Affairs. Unexpected optimism may strengthen the EUR, which, against the background of a moderate weakening of the US dollar, will contribute to the strengthening of the EUR/USD currency pair.

Moving to the American trading session, I would like to note the absence of important macroeconomic reports. Nevertheless, one should not expect a significant decrease in volatility. Let me remind you that the election race in the United States is gaining momentum, which means that the general news background will be saturated. Therefore, the USD may remain quite unstable.

Another very important event for the US economy, as well as the stock market, remains the ability of the US government to agree on another financial aid package in connection with the coronavirus. US Treasury Secretary Stephen Mnuchin and House Speaker Nancy Pelosi have agreed to resume formal talks on the issue. Any success in the negotiations will help strengthen stock indices and, as a result, put pressure on the US dollar.

Closely monitor the news background and be prepared for all the surprises of the market.