The US election count continues and the US$ remain under selling pressure. Markets are now betting on a clear win for Biden, a peaceful transfer of power and raising expectations of further US$ weakness. The Fed Chair spoke yesterday stating that the pace of US recovery has moderated, he highlighted concerns of the rising COVID-19 cases and urged lawmakers to act. Hopes for a large US stimulus are now fading as the prospect of a divided Congress could cause political gridlock in Washington. The US$ is on track for its biggest weekly drop since the end of March, with the US$ hitting 2-month lows and down 7% since May. In the currency markets CNY is flat, while other Asian currencies strengthened 0.3% on average vs US$. Trading currencies remain volatile with NOK & JPY up 0.2%, NZD up 0.3% while ZAR, AUD & MXN are down 0.2% vs US$. Intraday US election updates alongside US Nonfarm Payrolls will be followed closely to provide direction to the currency markets.
Oil prices drop below $40 a barrel down over -2.5% as markets refocus on demand concerns related to rising coronavirus cases. Supporting Oil are expectations that OPEC will delay the planned January increase in output. C$ bounced off 1.3024 its strongest level since Sept 1st, as falling oil prices offset the weakness in the US$. Intraday, Canadian jobs report due out today with expectations the Unemployment rate will be 8.8% and net change in employment at 100k (from 378.2k). Alongside the employment number is the Ivey purchasing managers index and both BOC Macklem and BoC Schembri will be speaking. Support at 1.2990 (oct 1st) with minor resistance at 1.3100, if breached look for 1.3220.
Euro strengthens on a weaker US$ as the US election count continues. The Euro could likely strengthen further despite the dovish ECB comments amid the 2nd-wave of the coronavirus that has locked down most of Europe. The ECB is warning of a fall in Q4 growth across the eurozone and pundits are expecting more ECB action at their December meeting. We anticipate any further Euro rally will likely be capped below 1.2000 in November as Europe remains in Lockdown. Support at 1.1710 with resistance at 1.1880 (sep21st), if breached look for 1.2011 (Sep1st).
GBP holds above 1.31 supported by a weak US$ and the UK coronavirus support schemes. GBP has benefited from BoE’s decision to increase its bond-buying scheme and the announcement that the UK will extend its successful furlough scheme. The elephant in the room remains Brexit. Friday is typically the day that the EU and UK chief negotiators give updates on the ongoing Brexit negotiations. With recent reports of fresh impasse, if either side shows any signs of frustration, we may see GBP come under selling pressure. Any positive Brexit comments could potentially see a significant GBP rally. Support at 1.2940 with resistance at 1.3177 (sep21st), if breached look for possible extension to 1.3482 (Sep1st).