Dollar lower, equities higher in mild risk-on mood
The dollar index moved lower and equities higher in a mild risk-on mood in the markets, despite mixed signals from the government. Late yesterday, Trump told Republicans to stop negotiating with Democrats on the stimulus package, effectively spurning comments by Fed Chair Powell that further government fiscal stimulus is now required to fuel economic growth. The market’s mood then improved after Trump tweeted support of several new financial aid measures, including checks to US citizens, aide to airlines and payroll protection. Global equities were mixed: higher in Asia, lower in Europe and a higher open in the US. US Treasury yields remain firm given expectations of a Biden victory leading to greater stimulus. Oil prices are soft and gold firm.
“In the practice of tolerance, one’s enemy is the best teacher.”
October 7, 2020
EUR/USD 1.1769 GBP/USD 1.2880 USD/CAD 1.3274 AUD/USD 0.7148 USD/JPY 105.96 USD/CNH 6.7340 USD/ILS 3.4037 USD/MXN 21.4776 USD/CHF 0.9167 USD/INR 73.3325
The dollar is lower on the back of a mild risk-on mood in the markets. Investors seem fueled by liquidity-driven demand in the face of confusion related to government fiscal stimulus. Fed Chair Powell spoke yesterday about the Fed’s exhausted efforts to promote economic growth, and the need for fiscal stimulus to step in. Late yesterday, Trump stopped negotiations between Pelosi and Mnuchin to deliver a new fiscal stimulus package. Later, the market’s mood improved after Trump tweeted support of several financial aid measures, including checks to US citizens, aid to airlines and further payroll protection.GBP
The UK pound was steady versus the dollar, but underperformed the euro following news that the UK will follow through with their plan to quit Brexit trade talks if no deal is reached by PM Johnson’s October 15 deadline.EUR
The euro firmed overnight, but remains under $1.18. Investors are digesting comments by Bundesbank President Weidman. The CFTC reported that large currency speculators have accumulated the largest long positions in the euro since early 2018.CAD
The loonie made slight gains against the broadly weaker US dollar. Soft oil prices had little impact. Traders await Canadian employment data on Friday. A second wave surge in Covid-19 cases continues.ASIA/PACIFIC
China is celebrating Golden Week, so Chinese markets are closed.
In the risk-on market mood, the Japanese yen was the only currency to weaken against the dollar overnight. Covid-19 cases in Japan continue to decline from the peak in early August.
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