Scope for USD rally extension in the short-term - MUFG

FXStreet reports that analysts at MUFG Bank note that there are some factors that could see a correction that began in big tech extend to the broader market, providing reason for further USD gains and with it JPY too.

"There is increasing evidence that the gap between the Republicans and the Democrats on agreeing a new stimulus package appears to be widening. A ‘Skinny’ stimulus package was introduced in the Senate by Mitch McConnell yesterday that included unemployment support of $300, a 50% cut. The bill also cuts the provision of $200B of funding to the Fed for its lending program and has no direct payments of cheques to US households. The package in total is worth $500B, way lower than the Democrats original $3trn package. So it’s either no stimulus or a very very modest stimulus boost.” 

“The polling for the election in November continues to tighten and this will inevitably lead to fears of a close election result that in turn could lead to a pronounced period of uncertainty immediately after the election with no result for days, possibly weeks. The longer polls show this, the greater the prospect of the markets taking fright.”

“We have news this morning that AstraZeneca has halted its vaccine trial after a recipient of the drug became ill. At the very least this is likely to delay the trial, at worst it could lead to failure. This is the first piece of bad news we can recall for some time on vaccines and hence is a clear downside for risk over the short-term.”