Risk aversion boosts the U.S. dollar
Financial markets came under heavy selling pressure last week as Republican and Democratic negotiators disagreed on the latest U.S. coronavirus stimulus package. At the beginning of the week, financial market participants expected that American politicians would be able to reach an agreement, after a series of positive tweets from the President of the United States, Donald Trump. However, it did not come to fruition. Traders decided to return to the safety of U.S. bonds and the U.S. dollar upon bearish news.
The SPX500 index stopped at 3,464 last week.
The SPX500 index declined last week due to a strengthening U.S. dollar. The beginning of the revenue reporting season appears as historical relative to forecasts. Among the SPX 500 companies that disclosed results, 86% beat analysts' estimates. However, this did not provide significant support for the Bulls. The result was a relatively flat week, during which the SPX500 index closed at 3,464.
SPX500 posted 50 new 52-week highs and no new lows.
Retail sales in September exceeded analysts' expectations, and consumer sentiment this month surprised with an increase.
The outlook is uncertain if Washington fails to reach an agreement on a new round of financial aid.
The EURUSD and GBPUSD pairs fell by 1% and 1.6% respectively, over the past week.
The U.S. dollar rose along with the safe-haven asset in the yen, as the U.S. economy falters with the improbable passage of a stimulus bill before the Presidential election. This is preventing investors from taking risks, so instead they're buying the U.S. dollar. British Prime Minister Boris Johnson said on Friday that it was pointless to continue negotiations, and it was time to prepare for a 'no-deal' exit. The talks broke down on Thursday when the European Union said Britain should give in. Such a finale would disrupt manufacturers, retailers, farmers, and almost every other sector taking into consideration the economic blow from the coronavirus pandemic.
AUDUSD fell by 2.46%
The Australian dollar hit a two-week low on Thursday after the head of Australia's Central Bank hinted at a possible easing of monetary policy, while the sentiment for avoiding risk boosted the U.S. dollar.
Britain and the European Union will try to reactivate post-Brexit trade talks on Monday.
On Sunday, more than 70 British business groups representing more than 7 million workers called on politicians to return to the negotiating table to strike a deal.
European Central Bank President Christine Lagarde supports making the region's 750 billion euro (878 billion USD) recovery fund a permanent tool in emergency situations.
The Australian government and business groups are calling on the state of Victoria to restart the economy faster as COVID-19 cases decline, pointing to growing job losses in retail and hospitality.
Nothing significant took place with the gold market during the week, but prices still retreated from local highs, and there are chances the downwards trend will continue. The significant levels for gold are 1,918, 1,906, 1,889, and 1,874 USD.
Oil is stuck between 41.50 and 43.70 USD per barrel.
The supplies from Libya increases, and the revived pandemic threatens demand once again. The OPEC is now under pressure to review its plan to ease production cuts. When OPEC and its allies met last month, Saudi Arabia's energy Minister challenged oil speculators to test their resolve to stabilize global markets.
The coalition of crude oil producers is meeting on Monday to assess the state of the market. No decisions on deliveries are expected until 1 December.
Leading council members of Saudi Arabia and Russia are already stepping up diplomacy.
Overall, many OPEC members are determined to support oil prices.
In the coming week, you should pay attention to the following economic news: China's Gross Domestic Product, the Fed chairman's speech, Building Permits in the U.S., the U.K. Consumer Price Index, the Core Consumer Price index of Canada, the speech of President-designate of the European Central Bank (ECB) Christine Lagarde, Retail Sales in the U.K., U.S. Initial Jobless Claims, and the last U.S. presidential debate on Friday.