This week saw the first of the US election televised debates between Joe Biden and President Trump. After the debate, Joe Biden remains ahead in the national polls. Hopes of extra US stimulus boosted risk assets on Wednesday as the prospect of the US stimulus bill passing gained pace. However, shock news that President Trump has tested positive for COVID-19 caused risk assets to sell-off on Friday as hopes of a last-minute deal between President Trump and Nancy Pelosi seemed to be dashed. As long as a stimulus deal remains elusive US equity futures markets should remain pressured.
Key events from the past week
- CNY: Manufacturing PMI, September 30. Chinese PMI data this week demonstrated that both China’s manufacturing and service industries continue to show evidence of recovery in September. As long as China’s recovery remains in place this should support risk markets in the medium term.
- GBP: Brexit optimism supports the GBP, September 29. The GBP fell as Brexit hopes were dashed on Thursday to only quickly reverse. Negotiations broke down over the State Aid issue and legal action is due to commence between the EU and the UK. However, the market still remains optimistic a deal will be done.
- USD: Rising stimulus hopes, September 30. Global stocks markets rallied mid-week on hopes of a new US stimulus package and US 30 year bond yields trad-ed up +1.45%. This market reaction is the assurance that a stimulus package should be supportive for US stocks.
Key events for the coming week
- AUD: Interest rate decision, October 06. Expectations are for the RBA to keep rates on hold. However, some analysts still see an RBA cut coming in Novem-ber. AUD traders will be carefully watching to see what forward guidance the RBA gives regarding a possible future rate cut?
- USD: FOMC meeting minutes, October 07. The last Fed rate decision disappointed the market as the Fed was not perceived to be ‘bearish enough’. Will the minutes reveal a more dovish slant by the Fed that was not revealed at the last interest rate decision?
- USD: Election and stimulus deal, October 05-09. US elections are approaching and we can expect continued volatility in the USD and global stocks. However, if a new US stimulus package is passed, that should support stocks and pressure the USD.