Without any doubt, the event of the week will be the US election which will take place on Tuesday, the 3rd of November 2020. Amid a busy economic calendar, we will also see more central banks holding their policy meetings.
October was another wild month for the stock market driven by geopolitics and the rapid resurgence of the coronavirus across the US, European countries, India and Russia forcing some leaders to reimpose national lockdowns. The recent themes will remain the dominant driving factors of the stock market this week:
In a pandemic-induced environment, the stakes are probably much higher for this election because markets are not only concerned about the next President but are more interested in knowing which party will hold a majority in the Senate and the House of Representatives.
The political gridlock in Congress has hindered the relief fiscal support the US economy needed during this pandemic. Just one day ahead of the election day, investors are mostly concerned with:
They will eye the election night for a clear result on Tuesday.
Brexit headlines have been on the positive side in the last few days with both the UK and the EU officials appearing close to finding a solution to their biggest obstacles. Investors will likely monitor the updates coming from both sides to see if the November deadline set by both sides will be met.
Major central banks like the BoE, the Fed and the RBA will hold their policy meetings this week. As widely expected, the BoE will likely keep interest rate unchanged but will ramp up its quantitative easing program.
On the other side, it is unlikely that the Fed will alter any of its policies during the election week. However, it will be interesting to see the tone of the central bank about the rising number of COVID-19 cases.
The RBA will probably be the most interesting central banks meeting this week. Following a series of dovish comments from policymakers and in recent speeches, there have been growing calls for a rate cut from 0.25% to 0.1% lately. This historic cut could be on the table at this meeting alongside some QE program.
After one of the busiest weeks on the earnings front last week, the US earnings season winds down this week.
It will be a busy week for the US markets and the US dollar this week with the elections and the Fed’s meeting. The employment report due at the end of the week will be another key event to monitor. Unemployment has soared to the worst levels around the globe and with the ongoing virus crisis, investors will be keen to monitor how the labour market is improving.
A series of manufacturing and services PMI figures across Australia, UK, China, Germany, Eurozone, and the US will be released this week allowing investors to keep track of the recovery or expansion seen in major economies recently.
Further national lockdowns have worsened the oil demand outlook. Crude oil prices will likely remain pressurised by the uncertainty on the demand side. In the meantime, traders will likely monitor the weekly oil reports for fresh trading impetus.
A stimulus gridlock in the US and a stronger greenback have underpinned the demand for gold. The XAUUSD pair struggled to trade around the key psychological level of $1,900. As of writing, the precious metal was trading around $1,876. The election night will probably bring some clarity for gold traders.
|Tuesday, 03 November 2020
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