Dollar lower, equities higher on upbeat Trump prognosis

Trump’s medical team say he could be released as early as today after successful treatment of Covid-19. Coupled with optimism of a US fiscal stimulus agreement, leading to risk-on mood in the markets -- a lower US dollar and higher equity prices. A second wave of Covid-19 cases has hit central Europe. US Treasury yields jumped over 0.70% for the first time in a month. Oil and gold prices are higher.

Economic Data:

Monday

US Service PMI (Sep)

Tuesday

US Bureau of Job Openings and Labor Turnover Survey (JOLTS) (Aug)

US Trade Balance (Aug)

Reserve Bank of Australia interest rate decision

Wednesday

US Fed Open Market Committee releases September 15-16 minutes

US Vice Presidential debate in Salt Lake City

China Composite and service PMIs (Sep)

Thursday

Initial Jobless Claims

  • FX Rates
    October 5, 2020

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    The dollar index is lower by nearly 0.40% with the risk-on mood in the markets. Optimism was fueled by a potential early release from the hospital of President Trump and by comments over the weekend by Nancy Pelosi that Trump’s positive coronavirus test could change the dynamic and lead to a break in the stalemate over the fiscal stimulus package. US equity markets are opening higher and volatility is down. Traders await confirmation of Trump’s early release and for a slew of economic data this week.

    GBP

    The UK pound is holding steady ahead of two weeks of intense Brexit negotiations. The key remaining issues include fishing rights and state aid. Early hopes for constructive talks between PM Boris Johnson and EC President Ursula von der Leyen were dashed to some extent, as she has gone into isolation after contact with a person who tested positive for Covid-19.

    EUR

    A surge in central Europe’s coronavirus cases increases the possibility of more strict lockdowns in Europe, which has become a headwind for further euro strength and demand by investors. However, this morning’s risk-on mood in the markets did manage to pull the euro nearly 0.60% higher versus the dollar from Friday’s close. Germany’s PMI of 50.6 exceeded expectations of 49.1 and remains above the key 50 level, indicating expansion, not contraction. Currency options traders were big buyers of euro calls today.

    CAD

    The Canadian dollar edged higher and to its best levels in two weeks on the back of a broadly weaker US dollar, and higher oil, gold and other commodity prices.

    ASIA/PACIFIC

    The Japanese yen weakened in today’s risk-on market, but remains within the tight 104.90-105.70 trading range in place for the last two weeks.

    The USD/CNY dropped below 6.80 for the first time in two weeks, as the yuan strengthened in-line with broad dollar weakness. Traders await China’s PMI data to be released on Wednesday.

     

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Scott Petruska, CFA
WRITTEN BY
Scott Petruska, CFA

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