The main drivers in the markets are predominantly geopolitical right now: upcoming US elections, ongoing Brexit negotiations, new vaccine developments, and rising COVID-19 levels are all impacting risk in different ways. However, the key event supporting risk this week has been the upcoming US stimulus package. At the time of writing, risk markets are broadly moving higher (equities the present exception) in anticipation of a huge US stimulus package. As long as the expectations of a US stimulus package remain expect strong gold bids on both USD weakness and general safe-haven flows on impending US election risks.

Key events from the past week

  • AUD: RBA minutes show cutting bias, October 20. The RBA minutes this week show that members discussed lowering interest rates towards zero. The expectations are now for an RBA rate cut at the upcoming November 03 rate meeting.
  • GBP: Sterling rises on Brexit deal hopes, October 21. The GBPUSD rose on news that EU negotiators are expected to go to London as soon as today (Thursday 22 October) to resume trade discussions with the UK. Will this optimism remain?
  • COVID-19: AstraZeneca trials to resume, October 21. AstraZeneca trials in the US are set to resume as early as this week according to sources cited by Ransquawk. Expect further positive vaccine news to be a positive boost to risk sentiment.

Key events for the coming week

  • CAD: Interest rate decision, October 28. The Bank of Canada is expected to keep rates unchanged with OIS markets giving an 85% chance of no change. Be prepared in case there is a surprise cut which will result in instant CAD sell-ing.
  • EUR: Interest rate decision, October 29. The ECB has expressed concern recently over both the strength of the Euro and the weak inflationary pressures facing the eurozone. Will this cause them to potentially cut rates this week or will they keep interest rates unchanged?
  • USD: Election risks, October 19-23. As long as Biden maintains a firm lead over President Trump in the polls that should be positive for risk and continued negative pressure for the USD.