US Dollar Could Ease on Mnuchin, Powell Testimonies
The US Dollar could come under pressure if testimonies by Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin before Congress add to a more upbeat mood in the market. Early signs that the US economy could be stabilising is offering support to risk sentiment, dragging on demand for safe havens.
Both players are expected to highlight the need for additional fiscal stimulus after talks between Democrats and Republicans have so far come to nothing. The deadlock, plus a lack of fiscal stimulus could change the outlook from one of slow, steady stabilisation to regression. A more pessimistic view could spark additional volatility in the financial markets lifting the premium on the safe haven US Dollar and
Pound looks to Brexit talks & EU tensions
Brexit tensions and negotiations will continue to drive the Pound ahead of October’s key deadline. Following UK Prime Minister Boris Johnson’s Internal Markets Bill, which undermines parts of the EU-UK Withdrawal Agreement, including a provision on the Northern Ireland protocol, tensions have risen between the EU and the UK.
On a broad level, the bill intends to keep goods moving fluidly between the 4 countries that make up the UK. For Pound inventors the key takeaway from the bill is the UK’s divergence from the Brexit Withdrawal Agreement and the fact that it strained already very fragile EU-UK relations.
Budget, Regional Stability Could Boost SKW
The South Korean Won could advance versus its regional peers, specifically the Japanese Yen and US Dollar if the South Korean parliament puts forward a bold supplementary budget. In recent weeks, coronavirus cases have spiked into the hundreds making any easing of lockdown measures less prudent and more difficult.
The resurgence in covid cases comes after the country appeared to get a grip on infections and as the economy showed signs of stabilisation. An improved trade outlook from China, South Korea’s largest trading partner has helped South Korea’s recovery. However, the surge in covid cases could derail the strong economic rebound following March’s economic collapse.
South Korean lawmakers are looking to implement a $6.6 billion package to support small businesses which have suffered amid the stay at home orders following the covid flare up. President Moon Jae acknowledged that the rise in coronavirus cases will likely hamper the economic recovery. Should policymakers implement a bold and coordinated fiscal plan, the South Korean Won could rise, despite the challenging circumstances.
EU Summit
This week, EU lawmakers will meet this week to discuss a broad range of issues, both domestic and foreign, including Brexit and China.. Discussions surrounding the economic recovery will also be included on the agenda. Any signs of coordination and could underpin the common currency. Meanwhile any intra-regional disputes could drag on the Euro
When push comes to shove Europe often manages to pull through. For example, when policymakers were arguing over a EUR750b stimulus package when the bloc was discussing the Covid stimulus package, talks were in deadlock for several days before an agreement was reached, after which the Euro surged as did local bonds stock indices. Following the resolution, the Euro surged with domestic bond yields and local equity markets.
