Wednesday September 30th, 2020

Risk sentiment dampens, equity markets weaken, while currency markets are mixed after the Presidential debate. The first Presidential debate described by commentators as acrimonious, with no clear winner, it raised concerns of a contested election and increased investor risk-off sentiment. If the next two Presidential debates are similar to the first, expect more risk off sentiment and a bias for more US$ safe haven buying. The US fiscal stimulus talks also remain in deadlock and the probably of a package before the election is fading. The US$ index is slightly higher at the start of the North American session. CNY is up 0.1%, while other Asian currencies are down 0.15% on average vs US$. AUD & NZD are down 0.1%, NOK is down 0.4%, while MXN & ZAR both rallied up 0.6% on average vs US$. Intraday, the US ADP Employment change, US GDP & US Pending Home Sales data will provide direction. 

Oil prices fall for a 2nd day as rising coronavirus continues to raise alarm bells on fuel demand and specifically jet fuel. Oil traders expect OPEC will likely not boost output as originally planned in 2021 in an attempt to offset the falling demand. C$ remains within its recent trading range despite weaker oil prices. Focus will shift to US data releases & Canadian GDP data out this morning for direction. Our bias for a weaker C$ remains. Support at 1.3340 with resistance at 1.3420, if breached look for 1.3537 (Jul21st)

Euro came under fresh selling after the Presidential debate prompted US$ safe haven buying. Euro remains vulnerable to further weakness as the EU suffers from sluggish growth amid a 2nd wave of coronavirus. The ECB President said, “low inflation poses fundamental challenges” and is weighing on Euro after weak German CPI data. Intraday US data will direct intraday trading. Support 1.1625 with minor support/pivot at 1.1670, with resistance 1.1785.

GBP weakened amid risk-off sentiment, calls for increased covid lockdowns and weak economic performance. The pound came under selling pressure after the Presidential debate with investors buying US$. The UK recorded its highest daily covid deaths since July 1st, prompting the Scottish leader to call on the PM for tighter lockdown restrictions. Q2 GDP was revised up to -19.8%, but still highlights GDP’s biggest fall since 1955 and placing the UK as the worst G7 performer in H1-20. UK/EU negotiators are at the negotiation table in Belgium, any lack of progress will likely put additional pressure on the GBP. Support 1.2765 with resistance lowering to 1.2900.