News & Analysis

Week Summary – Back-and-Forth on Stimulus

October 9, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

The week kickstarted with the concerns over the health of the US President to progress with conflicting signs on stimulus negotiations. It was another volatile week as markets sentiment flip flop back and forth between risk-on and risk-off.

Stock Market – The Tweet

After inconsistent headlines over the weekend, risk appetite improved on Monday on the back of President Trump’s health, higher expectations of a coronavirus package from the US and positive Brexit headlines. However, the momentum was short-lived as the US President Trump returned to the White House was marred by his tweet abruptly ending the stimulus talks.

As the week progresses, investors noted that the President is backtracking on his decision and there were hopes for different targeted stimulus packages or aid for the US economy. 

Global equities were better bid towards the end of the week on the resurgence of optimism.


Source: Bloomberg

Forex Market

In the forex market, the major currencies were mixed against the US dollar which lost some of its haven gains following the renewed optimism seen across the week. Commodity-currencies strengthened against the greenback.


Source: Bloomberg

Aussie Dollar – RBA and Budget

The Aussie dollar pared the losses made on Tuesday following the RBA monetary policy meeting and the Budget. On the economic front, aside from the dismal trade balance figure, the Aussie dollar is finding some support on housing data and the financial stability review:

  • Home owner-occupier increase by 13.6% in August
  • Investment Lending for homes rose by 9.3% in August

The Australian Financial Stability Review states that “Australian businesses and households are generally in a strong financial position but some will struggle in the near term”. At a glance, the report shows that:

  • The financial systems around the world are facing substantial risks.
  • Households’ finances in Australia have been cushioned from the impact of the pandemic by support measures.
  • Most businesses started with low debt but revenue has fallen for many.
  • The strong Australian financial system can support economic recovery.

As of writing, the AUDUSD pair has erased losses seen at the beginning of the week to trade around the 0.7180 level.


Source: GO MT4

New Zealand Dollar – Negative OCR

The Antipodean currency was among the worst-performing G10 currencies against the US dollar, dragged by dovish comments from the RBNZ’s official that the central bank is actively looking into negative OCR. On the economic front, the Business Confidence and Activity Outlook came above expectations:

  • The preliminary October read of the ANZ Business Outlook continued to show solid improvement across the board. 
  • Business confidence lifted 14 points to -15%, while own activity lifted 9 points to +4%. 
  • Many activity indicators are now back in their 2019 ranges.

After dropping to a low around the 0.65 level, the NZDUSD pair was firmer on Friday above the 0.66 level. 


Source: GO MT4

Oil Market

The improvement in risk sentiment and Hurricane Delta brought some relief in the energy market despite much uncertainty on the demand outlook and bearish oil reports. 

  • The API weekly reported a build in crude oil inventories of 951,000 barrels for the week ending October 2.
  • The EIA Crude Oil Stocks Change came in at 0.501M, above expectations (0.294M) in the same week. 

As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading around $41.12 and $43.27 respectively. Traders to monitor the hurricane Delta which is expected to hit the energy-producing region of the Northern Gulf Coast in the coming days.

Gold

The precious metal caught a breather on a weaker US dollar and hopes of a new US stimulus package. After dropping to a low of $1,872, the XAUUSD was seen trading firmer above the $1,900 level towards the end of the week.


Source: GO MT4

Key Upcoming Events

  • Overall Household Spending (Japan)
  • Caixin Services PMI (China)
  • Manufacturing & Industrial Production, Gross Domestic Product and NIESR GDP Estimate (UK)
  • Unemployment Rate, Participation Rate, Average Hourly, Net Change in Employment (Canada)
  • BoE’s Haldane Speech (UK)

By Deepta Bolaky
 @DeeptaGOMarkets

Monday, 12 October 2020 
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
o 0 o o 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0


Disclaimer:  The articles are from GO Markets analysts,  based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own;  should not be taken as either representative of or shared by GO Markets.  Advice (if any),  are of a ‘general’ nature and not based on your personal objectives, financial situation or needs.  You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice.  If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

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