Futures contracts on the main American stock indices seem to indicate the possibility of opening the market at record high levels. Moreover, the contract for the so-called fear index VIX has fallen to its lowest level since the end of February. It was then that its rapid rise began due to the developing coronavirus pandemic.
The fall of VIX futures into the February region may show quite clearly how the market is currently valuing the situation related to the epidemic. According to the investors, this is about to end and should no longer threaten the stock price in the United States (VIX is calculated on the basis of volatility for 30-day options on the S&P 500 index).
Joe Biden's announcement is also expected to help in this regard. President Elect has announced his plan to fight COVID-19 during his first 100 days in office. The plan includes a declaration to vaccinate 100 million Americans, strengthening mask mandates, and a plan to open schools. The current US problems in connection with the pandemic seem to be coming to the fore as the market with its valuations may be at least in the second half of 2021.
The American economy still has to wait for the relief package
The relief package for the U.S. economy remains a mystery. U.S. Treasury Secretary Steven Mnuchin was supposed to present Nancy Pelosi, who is a Speaker of the House of Representatives, a new plan worth 916 billion dollars. However, according to Pelosi, some parts of the relief package are unacceptable, so the impasse in the US Congress is still continuing. While company valuations are still climbing up, America and the Americans still have a serious problem with recreating jobs lost in the spring by the lockdown. Here the help package is essential.
Thursday important for the euro
The foreign exchange market is relatively calm. This may be due to the anticipation of today's talks between the UK and the European Union on brexit, which may be among the last. The lack of agreement after the weekend has led to a very rapid decline in the British pound, which is now trying to stabilize at USD 1.3380. Investors could welcome the start of the UK's vaccination program, which started yesterday.
The EUR/USD exchange rate remains above 1.2100 and seems to be waiting for the European Central Bank's decision on Thursday. In the currency options market, the anticipation of further rise of the EUR/USD exchange rate has fallen to its lowest level since 17 November 2020. This may be due to, among other things, uncertainty about the outcome of the talks on brexit, but also to possible intervention by the ECB. The Bank's representatives already in August made it clear that the euro is too expensive, which frightened investors and could lead to a correction in the direction of USD 1.1600. Will it be similar now? We will find out tomorrow.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
