Forex news for North American trade on October 21, 2020:
- EU will return to London this week for Brexit talks
- Paypal to allow users to buy, hold and sell four cryptocurrencies
- Pelosi: I think McConnell might not mind doing stimulus after the election
- Mark Meadows: There are a number of differences in stimulus talks
- Fed's Beige Book: Economic activity improved at slight to modest pace
- UK reports record 26,688 coronavirus cases vs 21,331 yesterday
- Italy reports record 15,199 new virus cases vs 10,874 yesterday
- EIA weekly US oil inventories -1002K vs -1375K expected
- Fed's Brainard: Aside from virus, biggest downside risk is no fiscal support
- Canada September CPI +0.5% vs +0.5% y/y expected
- Canada August retail sales +0.4% vs +1.1% expected
- Ramsden: BOE could push UK yields lower
Markets:
- Gold up $17 to $1924
- US 10-year yields up 2.5 bps to 0.81%
- WTI crude oil down $1.63 to $40.07
- S&P 500 flat at 3441
- GBP leads, CAD lags
This session had a little bit of everything, and a lot of confusions; but mostly it featured selling of USD assets. In particular, the US dollar was soft alongside Treasuries.
The dollar slump was a tough one to explain in the context of everything else happening. There's an undercurrent of uncertainty with the US ahead of the election and I think that's a part of it. The market is seeing a diminishing chance of stimulus ahead of the election as time runs out but there's also a solid chance of a blue wave and huge stimulus after. I spent some time today tracking down comments on stimulus in the lame duck session and I'm starting to think it won't happen or will be small.
In any case, it was a have day of USD selling in particular vs GBP, JPY, AUD and NZD.
The pound had its own tailwind as negotiations restarted in London. It was a very poorly kept secret and bid started as soon as London woke up. But it was relentless. I thought it might stop after the London fix but after a brief break it hit new highs at 1.3177 before backing off 30 pips late.
The euro went along for the Brexit ride but to a much less extent. Rising virus cases in the continent including a record in Italy today cast a shadow.
From a technical perspective, the drop in USD/JPY was notable after weeks of tight trading. This will be the third test of the 104.00 range since the pandemic lows and there has been signs of intervention before. Keep a close eye on this one.
