Daily Market Update

Stimulus Deadline Day; Euro Touches 1-Week High

October 20, 2020

Currency markets are mixed this morning as the dollar fell versus the Euro, but rallied against the Japanese yen, the Australian dollar, and the New Zealand dollar.

Overview

The British pounded traded in volatile ranges.  Overall, the Dollar Index is 0.2% weaker to start the day.

All eyes remain on Washington as today marks the deadlines Speaker Pelosi put in place to strike a stimulus deal before the election.  Speculation on whether a deal will get done or not has driven risk appetite for weeks, if not months.  House Democrats and the White House (via Treasury Secretary Steven Mnuchin) have worked to hammer out a deal.  However, the wild card remains the GOP-controlled Senate.  Even if the White House and Pelosi strike a deal, it is uncertain it will pass the Senate.  Expect risk, and thus the dollar, to be prone to headline risk throughout the day.

On the fundamental front, the Commerce Department reports that housing starts rose 1.9% in September after falling 6.7% in the month prior and building permits also rose. There is no more data slated for today but here are five Fed speakers on today’s docket.

 

What to Watch Today…

  • No major events scheduled for today

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AUD 

The Australian dollar led losses against the dollar and dragged the Kiwi lower as well.  The Aussie weakened dramatically after Reserve Bank of Australia Assistant Governor Christopher Kent said short-term rates may fall below zero.  AUD/USD fell as much as 0.8% and reached its weakest level in a month.

The Kiwi followed suit and sold-off 0.7% amid speculation that the Reserve Bank of New Zealand may also need to enact more monetary stimulus.  RBNZ Governor Orr said has warned of possible deflation taking hold of the economy.  Kiwi is at its weakest level since October 8th.

 

GBP 

The sterling jumped and dipped, per usual, overnight as traders jockey to position themselves for an unknown Brexit result.  Brexit headlines were sparse overnight, leaving GBP/USD without a clear direction.  At the time of writing, it was announced that the top negotiators from both sides will speak again this afternoon.  Overall, sterling is 0.2% weaker to open today’s session.

Meanwhile, the U.K. is also struggling to control the coronavirus.  Ireland (EU) and Wales (UK) have already announced full lockdowns.  Prime Minister Boris Johnson will hold a press conference this evening and the PM is expected to roll out new restrictions in Greater Manchester and perhaps other parts of the country.

 

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