September 21-25, 2020. Dollar strengthening is likely

2020-09-20

The trends of the pound and yen are likely to continue in the coming week. It is determined by the politics within the countries. Analysts expect the first steps from the new Japanese prime minister, the defeat of Boris Johnson, who is trying to violate the already signed provisions of the Brexit agreement, and clarity from the Bank of England on the policy of negative rates.

Buying the dollar is an anti-crisis strategy for investors, which can be canceled by further developments in the political events of the week. The proximity of the US elections and the current drop in stock indices will likely force the Fed to announce additional stimulus for the economy.

For the same reason, the Democratic Party is able to convince the Speaker of the House of Representatives, Nancy Pelosi, to agree with the Republicans and ratify the second package of economic aid. This could give their candidate Joe Biden additional points in the US presidential election.

The new week starts with the probable blocking of TikTok and WeChat, as well as the discussion by the House of Lords of Boris Johnson’s draft law, which allows violating the already signed provisions of the Brexit agreement. Both events have equal chances of positive and negative resolution of the situation, which determine the currency strategy of traders.

In the event of a breakdown in the sale of a part of the social network of an American company and Johnson’s victory, the markets will face a strong strengthening of the dollar, scaled up by the increased problems of the coronavirus. The increase in the incidence has already led to the resumption of quarantine measures against businesses in a number of developed countries.