US relief package hopes sees “risk on” phase resume

Intermediate

Macroeconomic/ geopolitical developments

  • Republicans and Democrats have still been unable to come to an agreement on a new economic relief package, but hope remains, which has helped the “risk on” theme this past week.
economic relief package
  • This was despite President Trump at one point stating that a deal would NOT be done before the election.
  • The other significant geopolitical development last week President Trump leaving hospital in recovery, having previously tested positive for COVID-19.
  • This has thrown the US Presidential election into some further unrest, with the next Presidential debate now cancelled.
  • However, Joe Biden continues to show well in the polls and financial markets seem more and more at ease with a Biden victory and even for a Democrat clean sweep at the November vote.
  • A strong Biden victory would ease the threat of a difficult transition of power.
  • COVID-19 cases continue to grow at a high rate across Europe and in the U.K., as many nations have instigated new national and regional lockdown measures.
  • Despite no tangible progress between the EU and UK in their trade talks, there appears to be some improvement in the chances of a deal being done.

Global financial market developments

  • Global stock markets pushed higher through the week, with US averages leading the more positive outlook.
  • In addition, market breadth has been supportive with the small-cap Russell 2000 a strong performer from late September.
Russell 2000 chart
  • In the major Forex markets, the theme has further shifted to “risk on” with the Japanese Yen and US Dollar weakening still further against most major currencies
  • The “risk currencies”, notably the Canadian Dollar, have particularly benefited.
  • GBPUSD broke above a notable barrier at 1.3007 for a more positive tone, from hopes of a EUR-UK trade deal.
  • EURUSD has further shifted to a more positive outlook short-term.
  • In the commodity world, Oil, Copper and Gold have all rallied as the US Dollar has again weakened, again echoing the “risk on” theme.

Key this week

  • Central Bank Watch: Some Central Bank speakers through the week, but no meetings or release of minutes to note.
  • Macroeconomic data: A very quiet week on the data front too.
  • Earnings season: Earnings season kicks off in earnest this week, with the spotlight on major US banks, Johnson and Johnson, Delta Airlines, United Health and Walgreens.
DateKey Macroeconomic Events
12/10/20Nothing of note
13/10/20Chinese trade data; UK Employment report; German CPI and ZEW; US CPI
14/10/20US PPI
15/10/20Australian Employment report; US Jobless Claims
16/10/20US Retail Sales

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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