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How A Democrat Win Could benefit EUR/USD and Gold Price?

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The US economy could be set up for a boom in 2021, and an EU/UK free trade deal is still possible.

Equities

Global stock markets closed in the red on Wednesday on lower hopes of passing the US financial aid before the US elections. On Thursday, the presidential candidates will meet in Nashville at 9:00 PM US Eastern time, 5:00 AM UAE time. National polls show a clear lead of Biden over Trump.

 

The first fiscal aid of $2.3 trillion combined with the Federal Reserve’s expansionary policy helped the US economy to recover at a “modest pace”. However, a second fiscal package is a must for the economic recovery according to the fed member Brainard.

 

A Democrat majority in the US Congress could lead to passing a $3.5 trillion fiscal package. Additionally, the market confidence could raise on a possible upcoming vaccine to the coronavirus. All of the above may put the US economy on the way to a boom in the few coming quarters.

  Stock Market

Change %

S&P 500

-0.9%

Dow Jones

-1.0%

NASDQ

-0.6%

Japan 225

-0.3%

DAX 30

-2.0%

FTSE 100

-2.5%

CAC 40

-2.3%

 

EUR/USD and Main FX Markets 

The greenback extended losses on Wednesday as the market started to price in a possible Democrat win of the presidency and Congress leading to a bigger fiscal stimulus, with a better global trade environment. The US Dollar index dropped to a seven-week low on Wednesday eyeing a test of 91.78.

A weaker US dollar pushed the EUR/USD to rally on Wednesday to a five-week high at 1.1879. A close above 1.1909 opens the door for a further rally towards the 1.2000 handle.

The GBP/USD climbed more than 0.8% as the EU Chief negotiators Michel Barnier signaled on Wednesday that an EU/UK trade deal was still possible. On the other hand, the bank of England member CM member Gertjan Vlieghe indicated that the council may consider negative interest rates as the central bank needs more firepower to boost the UK economy after the second wave of the coronavirus. The pair rallied to a six-week high at 1.3176 and closed above 1.3048 eyeing a test of 1.3310. 

 

Gold and Oil  

The oil price retreated on Wednesday as the US gasoline stockpiles increased reflecting weaker demand. The Brent Crude fell by 2.4% and closed below $42.50 eyeing a test of $39.60. While the US crude slipped by 3.6% hinting towards $38.37.

The Gold https://capex.com/eu/instruments/goldprice benefited from a weaker US dollar price and however, the precious metal failed to break above the October 12 high at $1,930. A break above this level would change the technical outlook to bullish.

Looking Ahead

Not much today on the economic calendar, the Sterling Pound traders will follow the Bank of England Governor’s Bailey’s speech at 10:25 AM (GMT). Later on, EUR/USD and Gold traders will find out about the US initial jobless claims at 1:30 PM and the Eurozone consumer confidence index number comes at 3:00 PM. Finally, the Fed member Barkin speaks at 6:10 PM.

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.