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WEEK AHEAD: NOVEMBER 09

Short Description

With Election Day having passed- what’s next for the US dollar? I lay out the 3 things I think will move the US in the coming weeks and rundown highlights from the economic calendar. Thanks! Rich

Video Script

3 movers of the dollar after the election - THE WEEK AHEAD (Nov 9-13, 2020)

Hi everyone, I’m previewing the week ahead in markets. It’s the first full week after the US election so I’m giving my post-election outlook for the US dollar. I will also rundown this week’s economic calendar – which includes a rate decisions in New Zealand and US inflation data.

There of course was a lot of political tension on Election Day but in case you missed it – there was some comic relief to be found from people posting their own versions of the Electoral Map. Here are some of the funnier versions I saw – I know you’re not supposed to explain the joke – but the underlying funny things about these is how this whole system of dividing up the country into these blocks of voters worth different numbers of seats is just confusing and doesn’t seem to work very well.

If you enjoyed some those memes, please click the like button - it really helps us spread the word about these videos!

So moving swiftly on to the economic calendar. It’s a slow start on Monday but on Tuesday we begin in China with consumer and producer price inflation for October, then move to unemployment data for the UK and the German ZEW survey. Early Wednesday it is the New Zealand rate decision, where most likely rates stay on hold with a dovish message from the RBNZ. On Thursday we have UK Q3 GDP and we expect to see data showing another month of deflation in the Eurozone. Finally on Friday there is Eurozone Q3 GDP and US PPI.

So thinking about the US dollar after this election, I think we have to cut out a lot of the noise and focus on the 3 biggest factors.

The biggest mover of the dollar short-term in my view is what will happen with US fiscal stimulus. We’re looking at a divided Congress between Democrats and Republicans either way, so who is President doesn’t matter quite so much. A really huge government spending package is out the window without the ‘Blue wave’ of Democrats running all of government- so there is less help coming for the economy and that means less risk-taking from investors and more demand for dollars.

Related to the first point – and what is always ultimately the mover of the dollar – is interest rates and the Federal Reserve. I think if markets start getting a whiff of a longer delay in stimulus getting passed by a fractured government after the election – then they will start expecting more from the Fed. If it starts looking like the Fed has to fill the void left by politicians and cut interest rates again or expand its bond-buying – that means more money printing, which is negative for the dollar.

Last but not least – because it is what is causing the need for the other two factors is the state of the pandemic – and more importantly the need for national lockdowns. We can look to the example being set in Europe and what happened to the euro. When national lockdowns were announced in Germany, France and the UK – the EUR/USD currency pair dropped for six days in a row. Lockdowns are bad for the economy and that probably means bad for the currency. The United States topped 100,000 cases in one day for the first time in the 24 hours after Election Day. US lockdowns are a choice for individual States- not the President. If more lockdowns come in the US, it’s bad for the US economy and I think means trouble for the dollar – especially if it means a more dovish Fed.

Right thanks everyone, good luck trading this week and make sure to subscribe to our channel so you don’t miss the next video.

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