Forex news for North American trade on November 5, 2020:
- FOMC leaves rates and bond buying unchanged, makes virtually no changes to statement
- Powell opening statement: The pace of improvement has moderated
- Fed's Powell Q&A: QE purchases are providing strong support to economy
- US initial claims 751K vs 735K estimate
- UK PM Johnson: There is light at the end of the tunnel on Covid
- SNB's Maechler: We have not yet reached limit of FX interventions
- ECB's Weidmann: This time the economic fallout is likely to be less severe than in the spring
- US Q3 prelim nonfarm productivity +4.9% vs +5.6% expected
- US initial claims 751K vs 735K estimate
Markets:
- Gold up $46 to $1949
- US 10-year yields up 0.8 bps to 0.77%
- WTI crude oil down 62-cents to $38.52
- S&P 500 up 67 points to 3510
- AUD leads, USD lags
It was the worst day for the US dollar since April by most measures as it took on water right across the board.
This was a case of a delayed reaction to yesterday's drop in Treasury yields along with the incredible rally in equities. A risk-on trade has gripped the market and I think it's the unwind of hedges more than the election results but you can write whatever narrative you want; the price is what it is.
The move in the dollar was steady across the board. The Aussie led the way with a 1.4% climb on the day and it all came after Europe arrived but it was a very steady bid.
All the commodity currencies did well but CAD trailed the pack due to the softness in oil and natural gas.
There were the usual cautionary headlines on Brexit but they were ignored today as cable short higher, including in a late flurry above the pre-election highs.
The strongest evidence that this was a move unique to the dollar was in CHF and JPY, as both fell significantly despite what was happening in equities. I have to wonder if some of that is potential gridlock in Washington compared to aggressive stimulus elsewhere, but it's probably flows.
The euro continues to shake off rising COVID numbers, including a record in new cases in France today. Even though they're rising, the pace of increase is slowing so maybe the market is starting to look beyond the cases.
