By Deepta Bolaky
It was another wild week driven by geopolitics and COVID-19 updates. Risk sentiment remains fragile dragged by the chaotic US stimulus negotiations, Brexit woes and the resurgence of coronavirus cases in some parts of the world while vaccine trials suffered major setbacks.
In a pandemic-induced environment where second waves of coronavirus are recorded in certain parts of the world, investors are mostly concerned on the amount of stimulus being put in the financial markets to support the global economy and the expectations of a vaccine to allow global activities to resume to normal levels.
This week was a reminder that more stimulus in the US before the election is highly unlikely and that there might be further delays in the race of a potential COVID-19 vaccine. Global equities went on a roller coaster ride swinging from losses to gains amid a risk-on and risk-off environment.
European stocks fell deeper as more restrictions across European regions loom.
On the earnings front, the third-quarter earnings season kicked off with major US banks. In an ultra-low interest rates environment, the financial industry is struggling faced by a series of pressures triggered by the ongoing pandemic crisis. Over the months, banks had made significant provisions for credit losses and saw major declines in asset management revenues.
In the forex market, the US dollar is regaining strength against major G10 currencies lifted by the risk-off sentiment. Amid a relatively subdued economic calendar, safe-haven currencies like the greenback and the Japanese Yen were better bid as major pairs were mostly left at the broader sentiment of the markets.
The Aussie dollar traded mostly on the backfoot this week dragged by elevated tensions with China, mixed employment data and the calls for a November rate cut.
The jobs data were not as drastic as expected but may still be a driving factor for a rate cut next month. Employment fell by 30,000 people in September and the unemployment rate has risen slightly higher to 6.9% from 6.8% instead of the 7.1% predicted. Victoria has seen most of the job losses given the currency lockdown restrictions.
All in all, the unemployment figures do not account for the people formally employed under the JobKeeper program but which are not actively working.
However, on the bright side, Australian confidence seems to surge with the new Budget as consumers validate the government spending blitz.
As of writing, the AUDUSD pair is currently trading around the 0.70 level.
Source: GO MT4
British Pound – Brexit and Economic data
The British Pound remained underpinned by Brexit woes. The currency found some relied on the news that Brexit talks will extend beyond the self-imposed deadline by the UK Prime Minister on October 15. After rallying above the 1.30 level, the GBPUSD pair fell to the 1.28 level.
On the economic front, employment reports were mixed:
Source: GO MT4
Crude oil prices found support on upbeat Chinese imports data, bullish weekly reports and October’s Oil Market Report by the IEA:
However, the World Energy Outlook 2020 report released earlier this week reiterates the struggles of the energy market in the coming years:
As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading around $40.82 and $42.99 respectively.
The precious metal remains driven by stimulus negotiations and the movement of the US dollar. The XAUUSD pair swung between losses and gains across the week. As of writing, the pair has reclaimed the key psychological level of $1,900 level.
Source: GO MT4
By Deepta Bolaky
|Monday, 19 October 2020
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