We’ve had reports this morning showing that the U.K. officially entered recession for the first time since the financial crisis in 2008 after the Office for National Statistics confirmed that the U.K. economy shrank by 20.4% in the second quarter, after dropping by 2.2% in the first. With the U.S democrats and republicans unable to reach an agreement on the stimulus package, it is becoming increasingly likely that the executive order issued by President Trump will come into effect. Especially given U.S. election is gathering momentum as Presidential candidate Joe Biden selects senator Kamala Harris as his vice president.
As a result, I anticipate short term dollar weakness, as the Dollar Index struggles to close above the swing high at 93.75. Yesterday’s price showed rejection of lows, but today’s price action thus far indicates rejection of highs, thereby suggesting indecision which will play into the strength of other currencies. As we have seen the rejection off the lows and the inability to close below the swing low at 1.16960 on 03/08/2020 for EURUSD, I believe this has created a floor and as the debate continues on the U.S. stimulus package and the U.S. election gains momentum, currencies against the U.S. Dollar and metals will benefit as a result.
