Tuesday October 27th, 2020

The US$ consolidates amid rising global coronavirus cases, fading US stimulus hopes and US election uncertainty. The seven-day rolling average of new coronavirus cases continue to rise across Europe, the UK and the US, as global cases approach 44mio. Europe continues to expand lockdown measures, increasing investor concerns about the impact on the global economy. Adding to US$ safe haven support is the fading hope of a US stimulus and uncertainty over the US election. Asian currencies strengthened on average 0.1%, while CNY was flat vs US$. Trading currencies were mixed with AUD flat, NZD, MXN & JPY are up 0.15%, while NOK rallied up 0.6% and ZAR strengthened 0.75% vs US$. Turkish lira continued to weaken down 0.8%, down almost 37% year to date. Intraday US politics will continue to dictate the US$ sentiment, alongside several key US data releases likely to impact daily US$ direction.

Oil prices consolidate as Hurricane Zeta closes down 16% of US Gulf coast rigs. Oil prices will likely remain under pressure as Libyan oil exports are expected to rise to 1 mio bp, with the possibility OPEC loosens output restrictions in January. C$ rebounds from Monday’s lows as oil prices strengthens 1% today. Increasing domestic lockdowns, and weak global economic outlook is putting pressure on the loonie. The focus will switch to the BoC rate statement on Wednesday. Support 1.3040, with resistance at 1.3140. 

Euro holds steady around the 1.1800 level as markets consolidate amid surging covid-19 cases across Europe. The German Chancellor warns the nation of “difficult months to come”, while France extends nighttime curfews in Paris and other cities. The ECB convenes on Thursday, expectations are the ECB will wait until December before they act further. Euro remains dependent on the US$ for direction and we expect continued volatility ahead of the US elections. Support at 1.1750, with resistance at 1.1900.

GBP if off Mondays highs, but holds above the key 1.30 level vs US$. Brexit continues to keep the pound supported despite increased covid lockdowns and political pressure on the PM. As long as the EU/UK negotiators continue to talk the markets will remain optimistic of a positive outcome. A failure in Brexit talks will likely see significant pressure on the GBP and it would increase the prospect that the BoE will instigate negative interest rates. The UK PM is facing greater criticism over his handling of the coronavirus, yesterday 50 conservative MPs sent a letter of complaint to the to the PM. The potential of increased volatility remains high as a Brexit decision looms. Support 1.2820 with resistance holding at 1.3080.