Week’s recap September 21-25 2020

In this week’s economic recap is recognizable a higher risk aversion sentiment in the market, and consequently turning to the United States dollar looking for a safe haven. The uncertainties around the economic recovery and the growing number of infections around the world have been influencing market expectations. Simultaneously, we are seeing the fragile Brexit negotiations where the UK suddenly tries to circumvent some previously established rules.

The Federal Reserve is currently trying to calm investors by reinforcing their strategy of maintaining rates near 0% until the inflation rates average 2% and unemployment rates improve.

As a consequence of those factors a small stock market correction was triggered, partially due to an overvaluation of some of the biggest companies in the USA. If this risk aversion continues, it’s safe to assume this correction will carry on.

In Europe, something similar happened, with most European indexes suffering a slight drop. In Europe’s case, the reason for this was mainly due to the rising infection cases, and the probability of a second wave.

In the foreign exchange market, where currencies like the Australian dollar and the Canadian dollar, which are more transactional during more predictable and stable times, suffered a drop as well.

Next week will be very revealing in confirming continue and somewhat of a test if the strategies imposed by financial institutions are effective or not.

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