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Post US Election. What to expect from the Stock, Forex and Commodity markets?
Biden wins. Now what to expect from Stock, Forex and Commodity markets?
Joe Biden wins the Election
Joe Biden is now President of the USA.
On Saturday, Biden was proclaimed winner after taking Pennsylvania and getting 279 electoral votes.
With new policies to be laid out, how will the markets react?
What stocks will likely face the most impact?
How about oil and gold?
Trump is not yet done for. He plans to take the election results to the Supreme Court to overturn the outcome.
Watch out for more volatility ahead.
What happens in financial markets during US Elections?
Higher volatility still lingers
Investors and prominent Wall Street figures said they were pleased that the election was finally over after the ongoing tension of the week-long ballot count.
Experts say that the victory of Democrat Joe Biden is good news, as it gives hope for an early decision on the issue of a stimulus package for the U.S. economy.
Biden is likely to put an end to the artificial trade wars with Europe and immediately consult with U.S. allies before deciding on the future of tariffs on Chinese goods.
High volatility may persist due to lawsuits initiated by the Republicans.
The last two months of Trump’s tenure could turn into a series of executive actions and efforts to make governing more difficult for President-elect Joe Biden.
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1. Stock Indices
On Friday, the index rose to the resistance level of 3,522 before dropping slightly, as the political split in the U.S. impacts a potential stimulus package.
The index’s earlier rally may have been based on rumours or expectations.
Unemployment fell to 6.9%, better than the expected 7.7%
Small companies may lose momentum since the coronavirus pandemic shows no signs of slowing down.
The number of coronavirus cases and the progress with stimulus package negotiations will dictate the path of the SPX500 index in the coming weeks.
2. Forex Currency Pairs
Broad dollar weakness has led to the growth of major currencies.
Rising stock markets have dampened demand for the dollar, and the U.S. Federal Reserve has kept its loose monetary policy intact, hinting at the prospect of even more quantitative easing.
The Central Bank of England kept interest rates unchanged and increased its bond-buying program by 150 billion pounds, which was greater than expected.
There is not much volatility on Monday, as currency markets have already reacted to Biden’s Friday victory and to the fact that Donald Trump, the first sitting President to lose re-election in 28 years, has made no sign of giving in.
The upcoming speech by Bank of England Governor Andrew Bailey and chief economist Andy Haldane will focus on negative rates.
The Reserve Bank of New Zealand is likely to keep rates on hold at its meeting but will lay the groundwork for negative rates in the future.
Since no one party has control of Congress, the issues regarding taxes and trade wars will likely not be addressed.
Traders are also wary of a sharp increase in coronavirus cases with more significant concerns of added lockdowns.
3. Gold
Gold has significantly strengthened due to the weakness of the dollar, and this rally is likely to continue if investors seek to find a new store of value other than the U.S. dollar, amid constant Central Bank interventions.
Renewed hopes of stimulus package increased the demand for gold as a safe haven.
The impact of COVID-19 continues to be felt in the worldwide gold market.
Investors would are still interested in adding gold to their portfolios.
Important levels: 1.1893, 1.1915, 1.1953, and 1.1973 USD.
4. Oils
Oil rose on expectations that OPEC+ will delay a planned increase in production which is poised to begin in January.
However, oil lost its previous gains due to a string of renewed lockdowns in Europe.
A record number of new coronavirus cases in the U.S. held back potential upward price movement for oil, too.
Key OPEC members fear that tensions in the OPEC+ Alliance could re-emerge with Joe Biden as U.S. President.
If Biden eases sanctions on Iran and Venezuela in the coming years, increased oil production could make it harder for OPEC to balance supply with demand.
A new surge in coronavirus cases poses an increased threat to the fragile recovery in oil demand.
Cold winter weather may help to support fuel demand, but little of that will be in the form of oil.
