Monday brings an improvement in sentiment in the financial markets with the possible implementation of a new stimulus package for the U.S. economy, or at least with the hope that this may happen soon. Investors will also look forward to the key report on the American labor market this week, which will be published on Friday.
The market bulls managed to raise all three major futures contracts for US indices, which are rising by about 0.8%, on the morning of September 28th. The sentiment seems to improve the statement of the House of Representatives speaker Nancy Pelosi, who expressed hope that an agreement with the Republicans can be reached and the talks are still continuing. Democrats, in turn, want to introduce an aid package worth 2.4 trillion dollars. The market is also waiting for the first presidential debate between Donald Trump and Joe Biden, which will take place on Tuesday. Optimism in the markets seems to have reborn despite, or in fact, thanks to the ongoing epidemic. According to CNN, 21 states reported that the number of new COVID-19 cases has increased by 10 percent. Thus, government support seems to be more and more needed, which the markets appreciate.
On the currency market, greater volatility may appear on pairs with the British pound. Option market investors are already pricing it, expecting that among the major currency pairs, the pound volatility this week may be greatest. All this in connection with the planned round of trade negotiations on brexit this week. On Tuesday in Brussels, talks between Michel Barnier, representing the position of the European Union, and David Frost will begin, Bloomberg said.
The market seems to be slightly optimistic about their outcome and the British pound was strengthening to the US dollar this morning, approaching 1.2800. French Minister for European Affairs Clement Beaune admitted today in an interview with "Les Echos" that there is still a chance for an agreement on brexit. It seems, therefore, that if there is a common line of discussion and a willingness to reach a compromise, the possible space to strengthen the pound is greater than the space to collapse in case of disagreement.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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