Monday October 5th, 2020

Risk-on mood returns with the prospect that the US President may be discharged from hospital. Equity, currency and oil markets strengthen on positive health updates of the US President. Positive tones are also being heard on the US stimulus front with Dem Pelosi saying progress is being made. Markets responded with Asian currencies up 0.2% on average, while safe haven JPY is down 0.3% vs US$. Other trading currencies, NZD is flat, AUD up 0.2%, MXN 0.45%, while CHF is up 0.4% vs US$. NOK strengthened 0.4% on firmer oil prices, despite strikes shutting down several of the country’s oil fields. ZAR the biggest performer gains +1%, on better than expected private sector performance. Alongside the US President health and US stimulus updates, focus will be on the US Services PMI data out this morning and should provide some intraday direction.

Oil prices rebound +3.5% offsetting Friday’s losses, lifted by news that the US President may be released from hospital. In other news, Libyan oil production rises to 290,000 bpd, offsetting Norway reduction due to Equinor shutting 4 oil & gas fields as strikes expands. C$ rebounds on strengthening oil prices and positive risk sentiment on the prospect that the US President will leave hospital today. Expect markets to remain fluid and focus will continue on the US President health and stimulus updates. Support at 1.3230, with resistance at 1.3330, if breached look for a move back to 1.3420.

Eur heads higher on increasing risk-on mood, with the prospects of the US President being discharged, US stimulus and Brexit optimism. EU retails sales came out better than expected up 3.7% vs expected up 2.2%, focus switches to German Buba President speech. Offsetting the positive EUR tone is the rising level of coronavirus infections across Europe. The Spanish capital Madrid was put under fresh lockdown measures and in France, Paris regions alert level was raised to the maximum. Focus will be on the US news for direction. Support/pivot at 1.1670 with key support at 1.1625, resistance remains 1.1785.

GBP is holding steady supported by Brexit progress and unwinding of safe haven US dollar. The UK PM & EC President spoke on Saturday and agreed to extend the Brexit negotiations until the end of October. A number of hurdles remain for a Brexit agreement including France’s tough line on fisheries and EU/UK remain deadlock on issues such as state aid. Rising coronavirus across the UK triggered fresh lockdowns in several major cities and the PM warning a “tough winter” ahead. Focus primarily remains on US President health updates and Brexit. Support 1.2825 with resistance at 1.3000.