Stimulus hopes spur risk-on mood, equities up, dollar down
A risk-on mood overnight was spurred by encouraging signals from the Trump administration that they have reversed course, and now may accept large-scale fiscal stimulus. Equity markets in Asia and Europe are generally higher, and opened higher in the US. The dollar is broadly lower, Asian currencies are outperforming. The Chinese yuan was the best performing currency versus the dollar -- the USD/CNY dropped to 6.70, a fresh 2 ½ year low. Bond yields are soft, oil lower, and gold higher.
October 9, 2020
EUR/USD 1.1806 GBP/USD 1.2962 USD/CAD 1.3152 AUD/USD 0.7216 USD/JPY 105.8 USD/CNH 6.6971 USD/ILS 3.3784 USD/MXN 21.2506 USD/CHF 0.9126 USD/INR 73.1325
The dollar is broadly lower, fueled by a risk-on mood spurred by new hopes for a US stimulus package. US equities are set for their best weekly gains since July. Markets are now in the process of positioning for a Biden win, a quick and important reversal from just last week when fear of a protracted, contentious election dominated market positioning.GBP
The UK pound was up slightly overnight, but underperformed against most of its peer currencies. UK GDP for August expanded by 2.1%, less than half the rate expected, and another sign that UK economic performance is trailing its European peers.EUR
The euro is trading over $1.18 again, up nearly 0.5% overnight. It’s highest level this year was $1.1936 on August 31. Italian bond yields fell further to 0.73%, the spread vs German bunds (-0.55%) is at its tightest level in over two years.CAD
The USD/CAD dropped below 1.3150 for the first time in over a month following unexpectedly upbeat Canadian employment figures released this morning: the unemployment rate fell to 9% in September from 10.2% in August, and employment figures showed strong gains.ASIA/PACIFIC
In the first day of trading following Golden Week holiday, China’s central bank unexpectedly set the USD/CNY rate at a lower level, signaling its acceptance of a stronger yuan going forward.
The Australian dollar soared by nearly 0.8% and to its highest level of the month on the back of overall strength in Asian currencies, particularly the CNY, and the broadly weaker US dollar.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory