7th October 2020 - The lack of additional fiscal relief can be next a key to further downside risks in US

Walid Salah Eldin

Active member
Trump's decision to halt the negotiations with Dems to reach a stimulus plan could boost demand for safe haven and send the risk appetite down.

Nasdaq 100 future rate could barely stand above 11200, after being trading above 11500 before the news which sent the greenback up across the broad.

Trump's decision could shock the markets as it came after the Fed's chief Jerome Powell argument to boost the economy by another reflation plan. Powell indicated that the current ample of stimulus efforts are in place and on the economy needs and cannot be over-reacting to the pandemic crisis.

Powell's talking was supposed to put pressure on the bipartisan to reach a deal but Trump's decision came to pour cold water on the hopes for having a close by deal to boost the economy further.

The negotiations were running between the house Democrats who were aiming for $2.2 trillion package and the republicans who were standing on only $1.6 trillion.

House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin looked to the markets in the recent days doing bigger efforts to revive these negotiations which were enough to boost the demand for equities.

But now the US indexes can struggle to have a floor, following Powell's clearer talking about the need for reflation and Trump's decision to halt the negotiations.

The demand for liquidation could drive USD higher versus its rivals and also versus gold which lost in the recent few hours more than $40 per ounce trading currently near $1875 per ounce.

The greenback has not been boosted by this liquidation wave only but also by more hawkish remarks from several Fed's governor such as Dallas Federal Reserve President Robert Kaplan who argued for more flexibility to raise rates.

Chicago Fed President Charles Evans said also previously that it is possible for the Fed to raise interest rates, before inflation starts to average 2%, while further quantitative easing may not provide additional boost to the US economy.

Have a good day

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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