An interesting situation is happening in the market. It is believed that Mr. Biden's victory in the US presidential election and the news about the effectiveness of the COVID-19 vaccine from Pfizer and BioNTech does not really support the optimistic mood in the market and promote demand growth in risky assets. In particular, investors think that these factors remain in force and the rally in stock markets will continue.
So why are consolidation in stock markets and uncertain dynamics in the currency markets observed?
The political tension or the so-called "constitutional crisis" in the US can be the reason for this. Here, Mr. Trump does not want to concede his presidential seat to Mr. Biden, believing that the elections were not transparent and there are a lot of violations. Moreover, the votes are still being counted.
Another factor is the COVID-19 vaccine from Pfizer and BioNTech. It can be recalled that the markets already reacted to this and now, investors want to see the next action – start of its production. The market sharply made reactions earlier to vaccine news on several occasions, but they all failed. Given these two most important factors, we can now understand why there is no continuation of the rally in the stock markets.
The picture still depends on the above reasons in the currency market, which entirely affect the dynamics of currency pairs. The lack of certainty about the winner in the presidential race, new records of COVID-19 cases in America and Europe, and the continuing risks of new lockdown of entire countries from this infection, hang over the markets supporting the demand for protective assets: government bonds of economically strong countries, the Japanese yen, the Swiss franc and, of course, the US dollar.
The stalled process of adopting new, earlier promised stimuli to support ordinary Americans and business is also one of the reasons that does not allow the USD to continue declining as expected. Before the election, the warring parties took advantage of this in order to attract supporters to their side, but they were never accepted. Still, investors were largely hoping for them. By the way, this topic has been exerting pressure on the US currency exchange rate for some time.
Looking at all that's happening, we note that this condition will most likely continue today; however, it is still difficult to say what to expect next week, since any news about Biden's legit win or a message about the start of vaccine production will turn the markets up, and the dollar, on the contrary, down.
Forecast of the day:
The GBP/USD pair found support at 1.3155 and may recover locally to the level of 1.3155. But if it does not break through this level, we will consider it possible to sell it on growth with a local goal of 1.3030.
The USD/JPY pair declined below the level of 105.00 level. If it holds below this level, it will further decline towards 104.10.
