While the European currency is steadily climbing up against the US dollar amid expectations that the new President of the United States will be Joe Biden, leading analytical agencies are already predicting a larger intervention by the Federal Reserve to save the US economy. The point is that even if Biden becomes President, he is unlikely to be able to push through the Senate everything that his Democratic party wants since the majority will remain with the Republicans.
Therefore, it is not difficult to assume on whose shoulders the task of saving the American economy will again fall, since it is unlikely that the new package of support measures worth $ 2.2 trillion proposed by the Democrats will pass through the approval of the US Senate. The adoption of a more modest budget spending program than would be expected in the event of a complete victory of the Democrats in the elections, and we are talking about only 1.5 trillion dollars, may ease short-term pressure on the US dollar, which is rapidly losing its position against risky assets. On the other hand, if real Fed intervention is required and monetary policy easing continues, the dollar is likely to lose ground in the medium term.
If the COVID-19 infection situation continues to grow, it will force the Fed to intervene before the White House administration does.
As for today's figures, which were published for the Eurozone, the good growth of industrial production in Germany in September this year once again confirmed the recovery of the economy after the first wave of coronavirus. According to a report by the Federal Bureau of Statistics Destatis, industrial production in September increased by 1.6% compared to August, while economists had forecast an increase of 2.5%. Compared to the same period in 2019, industrial production decreased by 7.3%.
As for another indicator that indicates the advanced state of the German economy, it has improved, but the data was collected before the new lockdown, so these figures are no longer of serious significance. According to Commerzbank, the leading indicator of the state of the German economy in October rose to 0.41 points from 0.31 points in September. The overall recovery of the world economy in the manufacturing sector has led to a good rise in the indicator over the past two years. However, the introduction of new restrictions and quarantine measures to contain the coronavirus pandemic may only have an indirect impact on the manufacturing sector, as the service sector will be most affected.
The report on retail sales in Italy for September showed that this Euroregion will not be so easy to enter the second wave of coronavirus, although economists' forecasts almost coincided with real data. According to the Istat report, retail sales declined in September this year after a booming period of growth in the summer, indicating that the recovery in consumer spending is fading. The index fell by 0.8% in September and grew by only 1.3% compared to the same period last year. In Q3, compared to Q2, growth was 16.1%, but this is the result of a rebound after a disastrous failure in Q2 when the economy contracted heavily as a result of the pandemic.
In conclusion, I would like to note the growth of industrial production in Spain, which according to the report, in September this year increased by 0.8%, but immediately decreased by 3.4% compared to last year. Most of all, there was an increase in the production of capital goods in September compared to August, where the increase was 1.9%. Production of consumer durables declined the most.
As for the current technical picture of the EURUSD pair, now the bulls are focused on breaking through the resistance of 1.1880, which will open a direct road to the area of the new maximum of 1.1920, from which it is "close at hand" to 1.1970. Most likely, the final calculation of the results of the US presidential election will shift to the weekend, so we expect major gaps on Monday with the opening of the Asian session. In this regard, I do not recommend speculative traders to leave open positions for the next week, as it is not clear which way the market reaction will be after the results are announced.
