Daily Market Update

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Daily Market Update

Dollar Falls to One-Month Low; Sterling Soars

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The U.S. dollar was under heavy pressure last night and fell to a one-month low. Today would mark the fourth straight day of losses. 

Overview

The greenback dipped as Treasury yields grew to their highest since June as traders increased bets that a stimulus deal will be reached, and the pending election will be a “blue wave.”  An analyst at Saxo Bank said, “the rise in yields suggests the market things a stimulus deal will be forthcoming and that the Democrats are set to take both the presidency and the Senate.”  There are several risks with that assessment.

First, a stimulus deal seems to be getting closer, but the wildcard remains the Senate.  The White House said its current proposal is 1.88$ trillion, below the 2.2$ trillion the Democrats have asked for.  Senate Majority Leader McConnel has warned the White House about bending towards the Democrats offer ahead of the elections.  This morning White House Chief of Staff Mark Meadows said the goal is to agree on some kinds of stimulus over the next 48 hours.  We are already past the self-imposed Tuesday deadline that Nancy Pelosi had originally set.

Second, while traders have begun to price in a Democratic sweep, this is far from a foregone conclusion.  This is especially true in the Senate.  President Trump and Former Vice President Biden will hold their final debate tomorrow night as early voting has already started in many states.  Election night is less than two weeks away.

There is no major economic data on this morning’s docket.  The Fed will release its Beige Book at 2 pm.  There are half a dozen Fed speakers today as well.

What to Watch Today…

  • Stimulus and Brexit negotiation headlines

View this month’s Economic Calendar

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CAD  

The Canadian dollar was also able to take advantage of a beleaguered greenback.  The loonie touched a 6-week high overnight before consolidating some of those gains.  Canada will report retail sales this morning that is expected to show sales rising 1.1% in August after rising 0.6% in July.  The consumer price index is also supposed to show modest price pressures with CPI rising to 0.5% in September, up from 0.1% in August.

Gains may be limited as the price of oil dropped to $41 a barrel on reports of increased American crude stockpiles, surprising analysts.

GBP  

The British pound popped higher, buoyed by the hope of a Brexit deal coupled with widespread dollar weakness.  The sterling is nearly a full percent stronger this morning after European Union Chief Michel Barnier said an agreement with the U.K. is within reach.  Overall, developments and fundamental data were light so the GBP/USD only seems to be trading on Barnier’s comments which highlights how the pair is prone to headline trading.

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