Forex news for North American trading on October 6, 2020:
- Pres. Trump says Pelosi not negotiating in good faith. Instructs a halt to stimulus negotiations
- US trade balance for August -$67.1B vs -$66.2B estimate
- Fed Powell: Should continue do we can to monitor downside risks
- US August JOLTS job openings 6493K vs 6500K expected
- Fed's Harker: Coronavirus is determining the trajectory of the US economy
- ECB's Lane: Expect about half of the cumulative decline in output to be reversed in 3Q
- Global dairy trade price index rises 2.2%
- Canada August trade balance -2.45B vs -2.00B expected
Markets:
- JPY leads, AUD lags
- S&P 500 down 48 points to 3361
- US 10-year yields down 4.8 bps to 0.73%
- Gold down $33 to $1879
- WTI crude oil up 70-cents to $39.90
There wasn't much going on in markets until Trump launched a bolt of lightning by calling off stimulus negotiations. I have been writing for days that those talks are what matters, not Trump's health. The reaction afterwards bore that out as the dollar jump, Treasury yield fell, gold tumbled and stock sank.
It was a classic risk-off move with the Australian dollar and emerging market FX leading the way lower. There are some questions about whether this is a ploy or some kind of political masterstroke and that's going to be the risk in the day ahead but I just don't see it.
The market is still trying to get its head around the move and almost everything is at a session extreme into the close. The question is what happens to the path of the US economy, what it means for the election and ultimately what kind of stimulus package comes.
Ultimately, I think that continues to come down on the side of risk aversion because Senate control is a wild card, even if you think Trump is going to lose.
So now it's onto the technical levels and managing risk. Every insertion of volatility like this though ultimately drives people to the sidelines until the dust clears on the vote.
