The greenback remains under pressure after a sell-off witnessed on Friday as risk-on tone prevails globally
Wall Street saw its best week in three months on Friday, adding to gains on continued hope that fiscal stimulus negotiations would lead to a deal prior to the election. The S&P 500 rose 0.9%, the Dow Jones Industrial Average gained 0.6%, and the Nasdaq Composite gained 1.4%. of note, the S&P 500 index ended the week with a 3.8% gain, its strongest rally since early July.
Asian equities were mostly higher on Monday, beginning the week with cautious gains, as investors clung to hopes for U.S. stimulus spending. The Trump administration on Sunday called on Congress to pass a stripped-down coronavirus relief bill. The People’s Bank of China has scrapped a requirement for banks to hold a reserve of yuan forward contracts, which fueled gains in China’s stocks. As a result, Shanghai Composite surged 2.3%, South Korea’s Kospi rose 0.5%, Australia’s S&P/ASX 200 edged higher by 0.2% while Japan’s Nikkei 225 bucked the trend and shed 0.26%.
In Europe, stock markets traded higher Monday, helped by hopes of further stimulus on both sides of the Atlantic. The Stoxx Europe 600 rose 0.3% in early trading, with banks posting solid gains. On the negative side, as U.K. and Italian authorities consider tightening virus restrictions, travel stocks came under some pressure.
Meanwhile, the greenback remains under pressure after a sell-off witnessed on Friday as a risk-on tone prevails globally. EURUSD has settled above the 1.18 handle after a strong bounce from the 20-DMA seen late last week. Later today, the pair could be affected by comments from the ECB officials including Lagarde.
On the negative side, the continued rise in coronavirus cases continues to make investors worried about extending restrictions that continue to hurt the economic recovery. From the technical point of view, downside risks for the euro remain limited as long as the common currency stays above the 20-DMA that turned into support on Friday.
