All Eyes On US Election
Although progress had been made, the EU Commission yesterday stated that there was still no breakthrough on a level playing field and fishing. With talks continuing, EU Chief Negotiator Barnier is scheduled to update the EU Ambassadors today with an update. There was little Sterling impact on expectations of an agreement with further talks scheduled to go well into the weekend.
The UK currency did post notable gains however as global risk appetite sharply strengthened with the Euro retreating to 7-week lows and pushing Sterling up to around the 1.1150 mark.
The Pound did retreat from previous highs following reports that Michel Barnier would signal that there was no breakthrough in talks, although there was solid buying on dips. As expected, sharp volatility surrounding the US election moved Sterling above 1.3135 against the Dollar before sharply retreating. Sterling has now fallen to 1.2920 against the Dollar and 1.1075 against the Euro as strong expectations of further Bank of England quantitative easing will be announced this week.
The October New York business conditions index strengthened to 65.1 from 56.1 previously while factory orders increased 1.1% for September after a 0.6% advance the previous month. There was no significant impact from the data as political considerations dominated market activity.
The dollar remained on the defensive with the Euro getting close to 1.1740 before fading. The dollar briefly lost further ground after the New York close with Euro highs near 1.1770, but gains faded quickly amid evidence that President Trump was doing better than expected by the opinion polls and projected to win in Florida. The dollar regained strongly against the single currency and commodity currencies and the Euro dipped to lows near 1.1600 before settling below 1.1650.
Vice President Biden was ahead in the popular vote, but there was a high degree of uncertainty over undeclared states. The dollar held steady despite expectations that mail-in votes would tend to weigh towards the Democrats. The Federal Reserve will announce its latest policy decision on Wednesday with no change expected.
The Euro made significant gains ahead of Tuesday’s New York open as the Dollar lost ground. Overall risk appetite strengthened amid strong gains in equities and defensive demand for the US currency weakened.
Largely due to its negative impact on the Dollar, a contending Joe Biden victory would be positive for the euro. As such, with the polls pointing to such a scenario, the euro has climbed decisively this week from a low of 1.1625 following a strongly dovish European Central Bank and an ever increasing rate of COVD cases.
Data To Watch
13:15 – USD – ADP Non-Farm Employment Change
15:00 – ISM Services PMI