Equities higher, dollar mixed amid US stimulus hopes

Global equities are higher and the dollar is mixed amid heightened hopes for progress on the US stimulus package. There was little reaction to last night’s VP debate or this morning’s mixed US Jobless Claims data. Talk in the market of a contentious election has been replaced by talk of what a blue wave might mean. Yesterday’s release of September’s FOMC minutes provided little insight into future monetary policy. Covid-19 cases surged in Europe, with Scotland and England imposing new lockdown restrictions. US Treasury yields are steady. Oil and gold prices are firm.

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    October 8, 2020

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  • USD

    The dollar changed little overnight, as markets were unmoved by last night’s VP debate or this morning’s Jobless Claims data. Talk in the market of a protracted, contentious presidential election has been replaced by talk of what a blue wave (Biden plus a Democratic Senate) might mean to financial markets and the economy. Initial Jobless Claims were a bit higher and Continuing Claims were lower than expected. FOMC minutes gave few clues for its future monetary policy guidance, reiterating a call for fiscal stimulus to support economic recovery.

     

    GBP

    The UK pound fluctuated in a relatively wide range overnight, yet currently trades near yesterday’s closing level. New lockdown restrictions took place in Scotland and England after Covid-19 cases surged across Europe. The first day of new Brexit negotiations ended and comments from both sides for reaching an agreement were encouraging.

    EUR

    The euro is lower amid news of Covid-19 surges across Europe. Minutes of the September ECB meeting showed: 1) no complacency in the fight against economic recession; 2) inflation expectations were at “very depressed” levels with risk of falling further; and 3) concern that gains in the euro were offsetting some of their monetary stimulus efforts.

    CAD

    The Canadian dollar made small gains overnight amid firm commodity prices. Bank of Canada Governor Tiff Macklem said they have more tools available to support the economy, including funds for lending, yield curve control, and additional QE asset purchases. When asked about negative interest rates, Macklem said “we are not actively discussing it, but never say never.”

    ASIA/PACIFIC

    Asian currencies were generally stronger overnight. Equity markets were mixed. The New Zealand dollar weakened after New Zealand Reserve Bank Chief Economist said they would rather provide too much stimulus, “than do too little too late.”

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Scott Petruska, CFA
WRITTEN BY
Scott Petruska, CFA

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