The currency market already decided that Mr. Biden is the winner of the US presidential elections, while everyone is still waiting for the announcement.
Why is this so? A clear signal indicating this is the rise of the US stock market, especially the shares of companies in the technology sector. This is because J. Biden personally and the Democratic party as a whole have supported technology companies broadly, which, in turn, are strongly linked by production chains to China. The subject of Apple's production in China alone is worth something. Therefore, investors believe that the victory of the Democratic candidate will lead to the normalization of trade relations between Beijing and Washington, which is the reason why the share prices of these companies rise.
The markets also believe that the end of the presidential race will lead to the fact that Congress will finally decide on the adoption of the previously promised new measures to support the country's economy.
Thus, the US dollar was expected to be under strong pressure against the background of strong growth of optimism in financial markets and increased demand for company shares. Earlier, its rate against major currencies was supported by the demand for protective assets, or rather for safe haven currencies, which also include the Japanese yen and the US dollar. Another signal indicating its extreme weakness was the decline of the USD/JPY pair, which was observed yesterday.
Usually, this pair declines due to the increased demand for yen amid growing negative market sentiment. But on Thursday, yen's growth occurred precisely due to the weakness of the US dollar. By the way, the same strong demand for gold can also be explained by this.
On another note, the Fed meeting on monetary policy was somewhat ignored, which reaffirmed the commitment of the regulator and personally of its leader J. Powell, to conduct an ultra-soft monetary policy. This is clearly the most main negative factor for the US currency rate amid electoral litigation between Trump and Biden.
Today, investors' attention will be focused on the publication of the US employment data. According to the forecast, the US economy should have received 600,000 new jobs in October against the September value of 661,000. The unemployment rate is also expected to drop to 7.7% against 7.9% a month earlier.
In this regard, we expect that the market is likely to interpret the negative data as another serious reason for adopting stimulus measures, and in turn, this will weaken the US currency in the future.
Forecast of the day:
The EUR/USD pair is trading below the level of 1.1840. Breaking through above this level will let the pair further rise to 1.1880.
The USD/JPY pair remains under strong pressure. It may partially recover to 103.80 in the wake of the publication of US employment data, but it will most likely continue to decline to 103.00 in the future.
