The BOE is in focus today

Bailey

There is still no official result in the US presidential election just yet, but we are getting close to one with Biden looking the favourite to pip it in the end.

That said, there are legal challenges ongoing now with Trump also demanding a recount in Wisconsin; but that will only happen once all the votes are tallied.

Republicans are still likely to keep hold of the Senate but the race is tight in the toss-up states of Georgia (Special) and North Carolina, so keep your eyes on that.

Equities have been rallying since trading yesterday with tech stocks in particular posting major gains. The same mood is continuing into today with S&P 500 futures up 0.8% while Nasdaq futures are up 1.5% as we look towards European trading.

The bond market though is signaling that any massive stimulus plans are pretty much dead at this point. Treasuries continue to stay bid with 10-year yields down another 2.8 bps to 0.735% now after the meltdown yesterday.

In FX, the dollar chopped around throughout and traded more mixed against other major currencies. The implications for the greenback is not a rather straightforward one as it will depend on the market focus in digesting the election result.

A Biden victory but there being a gridlock in Washington would prove bad for stimulus and economic aid in the short-term, but it also means that tougher measures such as corporate tax hikes are out of the picture as well - which bodes well for stocks.

That means that the reflation trade may not be a quick one to play out and we will come back to the battle between central banks and the virus pandemic once again.

Anyway, in Europe today, the focus is on the BOE as they are expected to expand their QE facility between £50 to £200 billion - consensus is £100 billion - but the market should still be fixated with the US election unless the BOE surprises with NIRP.

0700 GMT - Germany September factory orders data

Prior release can be found here. Industrial orders should reaffirm a continued bounce towards the end of Q3 but amid a more bleak outlook towards towards the year-end, the data above hardly matters to the market now.

0700 GMT - BOE announces November monetary policy decision

The prior (September) decision can be found here. With the UK going back into lockdown and the government scrambling to offer more fiscal support, the BOE has to do its part as well and while it may be too soon for negative rates - due to the lack of firm communication - at least the BOE will provide more QE later today. I won't expect the decision itself to shift the pound outlook considerably but watch out for the BOE's views on the economy and how they feel about negative rates now. That will matter more for the pound and I would argue that the risks are skewed towards the downside.

0830 GMT - Germany October construction PMI

Prior release can be found here. Construction activity was already seen losing steam towards the end of Q3 and given how current conditions are playing out, the outlook doesn't look too good besides housing activity.

0930 GMT - UK October construction PMI

Prior release can be found here. UK construction activity soared at the end of Q3 but should see some leveling off as fiscal support winds down. But as housing activity is holding up, that may help to alleviate some of the downside in the short-term although fresh lockdown measures will only serve to weigh more heavily on overall business activity.

1000 GMT - Eurozone September retail sales data

Prior release can be found here. After a solid beat in August, retail sales is expected to slip a little at the end of Q3 and the consumer outlook doesn't bode well going into Q4 as the virus situation worsens and tighter restrictions have been introduced.

1230 GMT - US October Challenger job cuts data

Prior release can be found here. The data provides information on the number of corporate layoffs by industry and region and acts as a general labour market indicator.

That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.