Tuesday, October 20, is the deadline for the Republicans and Democrats to reach an agreement on the aid package for the American economy, set by the House of Representatives Speaker Nancy Pelosi. The expectation may involve increased volatility in many asset classes.
After Monday's drop in stock indices by about 1.5 percent in the US, futures contracts are rising today as investors wait for any news about the new package. Nancy Pelosi said on Monday that Democrats and Treasury Secretary Steven Mnuchin continue to reduce their differences on the aid package. If this package is not introduced now, the next possible date will only be after the presidential election. This morning's Dow Jones futures contracts rose by more than 100 points, the S&P 500 by nearly 30, and the Nasdaq by more than 100.
Meanwhile, oil futures have fallen by 0.2 percent, to about $40.8 per barrel. It seems that the main reason for this is concerns about the recovery of demand for fuels, as the number of infections around the world continues to grow, and several countries have re-introduced restrictions, including Germany, Italy, France and Ireland.
The OPEC+ Joint Ministerial Monitoring Committee did not mention any changes to the plan to further mitigate the decline in oil production since January, but committed to support the market in the face of the next wave of COVID-19 infection. For the time being, OPEC+ maintained its decision to reduce production by 7.7 million barrels of oil by December.
On the currency market, in turn, we are again observing a potential weakness of the Australian currency (AUD). Last week, the Australian dollar was one of the weakest major currencies in the world due to comments about the possibility of lowering the yields of the Australian government's long-term bonds through their greater purchase by the central bank. Today, in turn, the RBA board said it is still considering how an additional monetary easing could support employment as the economy continues to open up. The deputy governor of the Reserve Bank of Australia, Christopher Kent, who oversees the financial markets, said that it would not be unexpected for short-term interest rates to fall below zero. Negative interest rates in Australia are still possible, which could negatively affect AUD, and push the AUD/USD pair into the key support area at 0.7000.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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