Quick Take
‘Risk on’ conditions made a comeback as US equities showed a much better bid on hopes of vaccines to treat COVID-19 available by th eend of the year, even if you wouldn’t be able to tell such shift in dynamics judging by the performance of the Japanese Yen, an outlier on Monday.
Quick Take
The time has come to start fully shifting the focus away from any second-tier events and be locked and loaded for the real fireworks in the form of the FOMC outcome (4.30 AEST), including both the Fed statement as well as Fed’s Chairman Powell press conference. Will the Fed continue to deliver on the ultra-dovish expectations in line with its new regime of AIT (Average Inflation Targeting) policies?
Quick Take
The main takeaway from the FOMC is that interest rates in the US will be depressed at the lowest bound for longer. After all said and done, it appears as though the Fed is making it clear that it has no intentions to fiddle with the rates setting policy until at least the end of 2023 judging by the median forecast of members in the dot plot charts.
## The Fortitude Of Asian/Oceanic FX Stands Out
Quick Take
The US Dollar had a bad day as the FOMC-induced gains were erased to the point that the word’s reserve currency ends the day as the worst performer across the FX board even if the net daily gains/losses for in most currencies were all compressed in a paltry +/- 0.2% range.
Quick Take
There has been and continues to be for the most part a serious entanglement in currency flows with a very limited number of pairs exhibits congruence in trends when analyzed from a 4-hour and daily perspective. A few exceptions exist but not a whole lot.
Quick Take
Plenty of markets are finally coming to life. What’s driving these sell-side flows in equities, which have finally hit hard the sentiment in Forex, where the USD has regained its dominance, is anyone’s guess.
The story of the week is the strength in the US Dollar. This move is definitely very meaningful and carries behind the type of real-money commitment that has finally allowed some huge technical milestones.
Quick Take
It was largely an undecisive and choppy day in the markets on Thursday with both the US Dollar and the Japanese Yen retracement a tad the huge gains made over the last week. Meanwhile, the Canadian Dollar outperformed, followed by a solid run in the Euro and Pound. The Aussie and the Kiwi saw a small round of buying at last.
Quick Take
The US Dollar and the Japanese Yen were the clear winners last week, while the Oceanic currencies and Gold were decimated. Sandwiched in the middle we find a group of four currencies (EUR, GBP, CAD, CHF) characterized by a far less acute imbalances of flows. US equity indices have been fairing far better, which helps explain the stalling in aggressive buy-side flows in the USD, JPY from earlier in the week.
Quick Take
The strength in the British Pound was the stand out feature on Monday amid less pessimism over a no trade deal between the UK-EU coupled with growing chatter that the BOE won’t go down the route of negative rates in the near future. The final round of negotiations are upon us ahead of the EU leaders’ summit on October 15th.
Quick Take
The price action in the last 24h had striking similarities and in a way is an analogous script to the one playing out on Monday. That is, risk-off associated currencies (USD and JPY) kept giving back gains with the Loonie also following the same path south. The Aussie and Gold continued to be the standout performers with the European block currencies (EUR, CHF, GBP) either hanging onto recent gains or finding further follow through demand. Lastly, the Kiwi, even if rising, remains an underperformer judging by the reinvigoration of equities.
Quick Take
Following the debacle of the ‘circus’, I mean, the televised US Presidential Election Debate last night, the risk-on sentiment remains undeterred. From what I could gather, backing up the existing positive order flow seen in equities as I explained in yesterday’s video analysis, we find Dems and GOP giving another go to a fiscal stimulus package.
Quick Take
There were two dominant factors steering the narrative lane in financial markets. On one hand, hopes for a US fiscal stimulus which by the end of the day were all but dashed even if US equites ignored it for the most part. On the other hand, the Brexit saga has come to its final stage and plenty of speculation in both front (deal and no deal) meant wild vol for the Sterling but no precisely conclusive in directional bias.
Quick Take
The unquestionable driver to set the tone in markets as a new week kicks off is the health of US President Trump after being diagnosed with COVID-19 last Thursday. The news led to an upset in risk sentiment even if by the end of the day, it still felt as though the market behaved far from pricing in a worst case scenario where Trump’s health deteriorates significantly and the re-election odds shattered further following last Tuesday’s debacle of the TV-debate.
Quick Take
‘Risk on’ flows was the name of the game with the Nasdaq 100 index soaring by 2.32%, followed by the S&P 500 up 1.8% and the Dow Jones up 1.7%. The Pound was the main winner on Monday while the risk-off associated currencies like the USD and JPY suffered.
Quick Take
The news about the off-the-cuff decision by US President Trump to cancel further fiscal stimulus talks until after the election has been felt and is still reverberating around all corners of the financial markets with equities in the US alongside the Aussie taking a severe hit.
Quick Take
The state of unpredictability by the Trump administration continues to be well portrayed through the erratic market swings this week. Trump opened the can of worms by announcing the cancelation of further fiscal stimulus talks until the election is over. However, in just a matter of hours, there’s been a U-turn by Trump, tweeting that he would support a one-off stimulus for particular sectors. It is still a very dicey environment as to whether Democrats and Republicans can agree.
Quick Take
We’ve had follow-through ‘risk on’ flows as portrayed by the continuous rise in US equity indices alongside the outperformance of the Australian and the Canadian Dollar as Trump keeps the hopes for a fiscal stimulus deal alive. Mr. Markets appears to behave as if sooner or later this deal will be struck by giving the benefit of the doubt.
Quick Take
In my latest report I made the case that the market kept behaving in a manner that continues to give the benefit of the doubt (glass half full) to ultimately see further fiscal stimulus in the US being agreed.
Quick Take
If last Friday was all about USD weakness with out without a fiscal stimulus deal in the US, in the first day of the new week the dominant theme was the surge in US stocks with or without Columbus Day as the Nasdaq index leads the charge into higher territory.