In the coming week, abnormal volatility is expected in the Forex market due to important and unpredictable events.
Brexit news will be the main disturbing factor. At the beginning of the year, an EU summit was scheduled for mid-October, ratifying a package of economic cooperation with the UK, which is still missing. The pound will collapse, pulling the European currencies with it, if the heads of the EU countries go to the restoration of borders without conditions. It is obvious that the UK is happy with this development. This should be decided at the EU Summit on October 15-16, where Great Britain’s Brexit is on the agenda
Another option is also possible – the extension of the negotiation process, then all the attention of traders will shift to other negotiations – on the coronavirus, between Congress and the White House. Donald Trump at the end of the outgoing week, unexpectedly surrendered, deciding to accept an economic aid package before the elections, if the Democrats agree to the $ 1.8 billion figure.
The decision is related to the lag in the ratings of the incumbent president from Joe Biden. Currency traders are already pledging the likelihood of a new head of state coming in November. Speculators are especially active in the currencies of developing countries hit by Trump’s sanctions. Specifically, the Mexican peso rose 4% in the first week of October.
The growth of the stock market can contribute to the weakening of the dollar, investors are able to transfer part of the funds from US bonds to shares of technology companies and the financial sector. Next week, the markets are waiting for the presentation of 4 models of Apple smartphones and the release of reports of large banks with profit indicators for the third quarter.
Among the hidden threats to the currency market, it is worth noting the growing dissatisfaction with the ECB with the EURUSD rate. The euro can weaken strongly and unexpectedly, in the case of public statements on this topic from Christine Lagarde. The head of the ECB will speak at a forum organized by the IMF, where the heads of the Bank of Japan and England will express their positions and arguments.