The end of the week seems to bring declines in stock indices in Asia and Europe. The decline in futures contracts in the United States may also be noticeable. The market sentiment seems to be slightly worse due to the escalation of the conflict between the US and China.
The authorities in Beijing have ordered the American administration in Washington to close their consulate in Chengdu. This was in retaliation for forcing China to close its consulate in Houston early this week. It was also a retaliation for the words of Secretary of State Michael Pompeo, who described the Chinese leadership as a tyrant with a global hegemonic orientation, giving a darker picture of the country's direction, which further increased tension between the two powers.
Work on another stimulus package for the American economy, whose announcement helped Wall Street, is also delayed. However, persistent differences between the Republicans in the Senate and the White House are holding up implementation of the package. The leader of the Senate majority, Mitch McConnell, said that the $1 trillion plan will be ready on Monday, Bloomberg said.
The total number of coronavirus cases in the United States has exceeded 4 million, doubling in six weeks. President Donald Trump cancelled the Republican Presidential Convention in Jacksonville because of the COVID-19 threat.
Investors are beginning to fear that the U.S. may recover more slowly than other economies with the next wave of infections. This may also be one of the reasons for the fall of the US dollar. Two banks, Bank of America and Wells Fargo are consequently raising their forecasts for the EUR/USD pair. Wells Fargo, in a note quoted by Bloomberg, adds that an additional factor weakening the dollar may be the result of the next FOMC meeting.
The EUR/USD exchange rate is still above 1.1600, and as stock market sentiment worsens, both the Japanese yen and the Swiss franc seem to strengthen even more against the USD.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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