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The dollar lost ground on Thursday as stocks recovered on headlines suggesting the US Congress will restart stimulus talks.
The lack of progress on a fiscal stimulus bill so far, is fuelling speculation the Federal Reserve will have to expand its asset-buying campaign at a December policy meeting. It remains to be seen how the decision of the Treasury Secretary Mnuchin to let the Fed’s emergency lending programs expire by the end of the year will affect the central bank’s ability to support the financial system.
Meanwhile, the Central Bank of Turkey hiked interest rates by the most in over two years spurring a rally in the currency. The Monetary Policy Committee led by Governor Naci Agbal on Thursday lifted the one-week repo rate to 15% from 10.25%, as expected.
In the EU front large parts are shut down to combat the recent surge in COVID-19 cases, while EU leaders assess ways to disperse the funds available to bolster the region.
European and US markets showed a worsening picture, despite news that the Pfizer COVID vaccine was claimed now to have an efficiency of even 95 per cent as Wall Street Investors remain concerned over coronavirus developments, with further toughening measures taking place.
This Friday, Germany will publish the October Producer Price Index (PPI), while the European Commission will unveil the preliminary estimate of November Consumer Confidence, which many expect will show worse results than the -15.5 at the previous reading.
The euro gained against the dollar late on Thursday, trading around 1.188 by 21:05 GMT as the number of Americans filing initial claims for state jobless benefits last week unexpectedly increased to 742 thousand and as concerns mounted that the rising number of COVID-19 cases will further trouble the recovery in the labour market.
The US also published the Philadelphia Fed Manufacturing Survey, which came in at 26.3, better than the 22 expected. October Existing Home Sales increased by 4.3%, beating expectations.
On Friday, Germany will publish the October Producer Price Index, while the EU will unveil the preliminary estimate of November Consumer Confidence.
The pound bounced from the 1.32 level against the dollar late on Thursday trading around 1.3270 at 21:30 GMT, despite news that Europe's leaders would demand that the European Commission publishes no-deal contingency plans as the year-end deadline for a trade deal between the U.K. and the European Union nears.
While the contentious issue of a possible border between the British-held Northern Ireland and the Republic of Ireland on the South of the island seems to be politically resolved, with businesses in Northern Ireland now having to adjust within a short time to a sea border with Britain, the issue of fishing rights is still unresolved. Especially France is seen as demanding significant concessions from the UK in order for a free trade deal to succeed.
On Friday the UK retail sales statistics for September will be presented, with expectations that on an annual basis it will still show an improvement by 4.7% as in the previous reading.
The Turkish lira posted a noticeable increase against the dollar on Thursday following an interest rate hike by the central bank of Turkey which prompted analysts to withdraw to a great extent, bearish bets on the Turkish currency
After several months of weakness, the Turkish currency improved to a two-month high against the dollar, with the pair fluctuating just above the 7.55 level.
The country’s central bank raised its benchmark repo rate by 475 basis points today, which was on the top end of analysts’ expectations and market participants now shift their focus on Erdogan who is highly influential in the central bank’s decisions, and how patient he will be in tackling with the country’s inflation.
There was mixed sentiment in the equity markets on Thursday, with the US 30 and US Tech 100 index managing to stabilize and close higher, while the broader index US 500 again closed in the red.
One of the biggest moves of the day was seen in the stock price of the Chinese video sharing platform Bilibili (+21.97%) thanks to positive earnings in Q3 thanks to better than expected revenue, which reached $475 million and an improvement of 83 per cent compared to the previous year.
The rally in Jumia (+18.22%) stocks continued, with the stock price now racing above the high from August last year and improving since Monday by 43 per cent. At this rate, the stock is now even trading with a strong upside compared to the pre-earnings price in November, where the earnings indicated lower merchandise volumes, while profits were up. Investors still need to be careful to assess how much the Africa-focused e-commerce company can benefit from the shifting consumer behaviour amidst the COVID-19 pandemic.
While at this point most major companies already released their quarterly results, still next week some potentially interesting earnings are coming up, such as Best Buy, Tiffany & Co., Dell and Autodesk on Tuesday.
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