Forex news for North American trade on October 26, 2020:
- Biden will push for immediate $2 trillion stimulus package along with tax increases
- Pelosi remains optimistic on pre-election deal
- France Covid cases rise by 26,771 vs 52,010 yesterday
- New UK cases rise by 20,890 vs. 19,790 the day before
- Tropical storm Zeta leads to US offshore production shutdowns
- SNB: Overvalued Swiss franc can pose a problem for Swiss financial industry
- Dallas Fed October manufacturing index 19.8 vs 13.6 prior
- US September new home sales 959K vs 1025K expected
- Kudlow: Stimulus talks have slowed but not ended
- Johnson spokesman: There is much to be done to bridge significant gaps
- Chicago Fed Sept national activity index +0.27 vs +0.60 expected
Markets:
- Gold flat at $1902
- US 10-year yields down 4.5 bps to 0.798%
- S&P 500 down 75 points to 3390
- WTI crude oil down $1.33 to $38.52
- USD leads, CAD lags
The equity market took a beating globally on Monday but the FX market generally shrugged. There was some moderate selling on commodity currencies but little if any follow through.
Even as the S&P 500 fell 100 points at the lows, the FX market hung tough and AUD/USD held the Asian low. CAD slumped somewhat more but that was in large part due to falling oil and commodity prices.
Part of the conundrum is that there's nowhere to hide. Getting away from the US election is a fine idea but are you going to go to Europe where COVID is causing shutdowns? To the UK? Emerging markets? Negative carry makes it a tough call to go anywhere.
There was lots of political talk on Monday and it's tough to tie it into a coherent narrative around the market moves, especially with Europe faring even worse than the US. For me it's a COVID story and once again an example of how the market can ignore the virus until it becomes too bad to ignore; at least for a few days. Understandably there are fewer buyers than normal to buy-the-dip.
