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Intermarket:
- SP Futures 3449 (+0.01%)
- EUSTXX 3173 (+0.35%)
- Crude Oil 40.53 (-0.31%)
- US 10YR 0.85 (+0.19%)
- EurUsd 1.1800 (-0.15%)
- UsdJpy 104.73 (-0.11%)
- DAX 12571 (+0.35%)
Risk appetite stabilised overnight after House Speaker Pelosi suggested that fiscal stimulus talks are “just about there, despite Senator McConnell suggesting there is not enough time for a vote before the elections. The S&P 500 advanced 0.52%, led by banks as well as Tesla, Coca-Cola whereas Intel slipped after a tepid forecast and surprise drop in data center chip sales. Meanwhile, the FDA has approved Remdesivir.
The second presidential debate was more orderly than the previous, but no clear winner emerged. Focus may shift to next week’s ECB meeting where no change and a dovish bias is expected. Any developments on Brexit will also be key.
Looking ahead: we get the release of October flash PMIs for the euro area (including Germany and France), UK and US. In Europe, we expect PMIs to drop after worse ZEW and IFO.
Matters that Matter:
• Trump and Biden clash sharply over pandemic in less chaotic final debate
• Pelosi, White House see progress on COVID-19 aid talks; Senate Republicans wary
• Britain signs first major post-Brexit trade deal with Japan
• Japan Oct mfg PMI 48.0, September 47.7, below 50, sector still in contraction
• AU Oct Manufacturing PMI 54.2, 55.5 prev; Composite PMI 53.6, 50.5
• NZ’s weaker inflation prompts talk of more near-term stimulus, NZ Q3 CPI QQ 0.7%, 0.9% f’cast, -0.5% prev
Majors 1-Day View:
USDJPY
- Profit taking materialised from extended readings yesterday, prices posting an inside day. With sellers returning in Asia this morning, signals remain bearish for today.
- Jpy crosses also on the back foot.
- Presidential debate may have highlighted election uncertainty with no clear winner emerging.
EURUSD
• Prices posted a bearish engulfing at the daily level yesterday, interrupting the sequence of higher daily lows. While this move is potentially corrective, it has the potential to extend further and with selling noted in Asia, signals for today switch to bearish.
• Prices driven by US stimulus probability.
• Eur negatives remain: dovish ECB, Covid-19 cases, lockdowns.
AUDUSD
• Prices posted a little changed close yesterday, despite confirming a slight upwards bias. However, after posting a marginally higher high for the week during Asia trade, prices retreated and signals have weakened. Despite the sequence of higher daily lows still intact, we prefer selling rallies to .7130s today.
• Prices driven by US fiscal stimulus talks.
GBPUSD
• Prices posted an inside day yesterday, with buyers unable to defend 1.3100. Signals are more mixed going into Friday: we remain atop Wednesday’s Marabuzo line, but selling in Asia has taken prices below yesterday’s low. As such we suggest selling rallies towards 1.3120/40.
• Markets trading on Brexit headlines as brinkmanship continues.
• UK consumer sentiment worst since start of pandemic.
FX Relative ATR Grid
Comment: Ranges remain healthy only on NZD pairs, while volatility expansion can be expected in some JPY and GBP pairs after evident volatility contractions yesterday with ranges in the 50% area. Ranges are uninspiring elsewhere.
FX Relative Strength Grid
Comment: the main signals going into Friday are NZD strength and CHF strength vs. GBP, JPY, Eur weakness.