The mood in the market deteriorated in the Asian session as US fiscal stimulus hopes faded
Congressional talks will continue determining the outlook for the US Dollar ahead of Speaker Pelosi’s deadline.
US Dollar Index (DXY) trades confined within a bearish Descending Channel formation. Will the absence of support spark a topside breakout?
The mood in the market deteriorated notably in the Asian session as US fiscal stimulus negotiations remained in focus ahead of today’s deadline.
The safe haven US Dollar and Japanese Yen advanced versus major peers. The risk-sensitive Australian Dollar dropped to monthly lows.
Gold held strong.Silver edged northwards as yields on US 10-year Treasuries stood unchanged.
US housing starts for September are due \nd investors will stay focused on US fiscal aid talks.
US Stimulus Talks Drive Sentiment
Republicans and Democrats negotiations for additional fiscal continue driving market sentiment in the short term, after House Speaker Nancy Pelosi set a 48 hour deadline by which a deal must be agreed..
Pelosi remains hopeful that there will be more clarity as to whether a deal will be secured before the election, even though she was less than impressed by the White house’s recent $1.8 trillion proposal .
The need in the US for additional stimulus is clear as the county sees covid cases rise by 55,000 a day and high-frequency data reveals notable slowdown in the economic recovery.
Job postings are 16.3% lower compared pre-crisis level and look to be trending lower while consumer spending has stalled after peaking in early September.
Even so, the economic deterioration could fail to prompt US policymakers to act.
Even if a bill is agreed, there is a chance it will be voted-down in the Senate, given that Senate Majority Leader Mitch McConnel favours a substantially reduced aid package in the region of $500 billion.
Consequently if seems unlikely that US policymakers will agree a deal before the Speaker’s proposed deadline, potentially fuelling risk aversion boosting the safe haven USD.