Dollar Gains, Risk Falls as President Trump Tests Positive For Covid-19

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Dollar Gains, Risk Falls as President Trump Tests Positive For Covid-19

OCTOBER 02, 2020

It was a hectic night for markets. The dollar is gaining across the board and U.S. equity futures are sharply lower on news that President Trump and First Lady Melania Trump tested positive for coronavirus.

Overview

The President is said to be quarantined in the West Wing and has canceled most of his daily schedule.

The White House has yet to disclose whether the President is showing symptoms.  Vice President Mike Pence tested negative for coronavirus.  We expect currency and stock markets to be vulnerable to headline risk as more news about the President’s health is released.

Today’s Non-farm payrolls print was set to be the largest risk event on this week’s calendar.  President Trump’s health will outweigh the data in today’s trading but have a big effect on the outlook for the economy.  Non-farm payrolls largely disappointed. The U.S. economy added 661K jobs last month, missing estimates of 859K gains.  Some had expected the print to be well above 1 million jobs created.

On the brighter side, July’s print was upwardly revised.  The unemployment rate also fell to 7.9%, better than the estimated 8.2% but this was due to a drop in the participation rate.  Analysts were quick to bring up worries about what the October reading may look like.

We have already seen large employers such as airlines, banking, and Disney announce massive layoffs this month.  The dollar has not shown a strong reaction to the data, with traders continuing to focus on the President’s health.

What to Watch Today…

  • No major events scheduled for today

View this month’s Economic Calendar

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JPY

The safe-haven Japanese yen is gaining this morning as uncertainty surrounding President Trump’s health has caused investors to sell risky assets and pile into the perceived safety of the yen.  Bloomberg reports that institutional traders and leveraged funds are likely to buy the Japanese yen and cause it to strengthen, “reversing the small bearish position they held last week.”  However, if the President recovers quickly or is asymptomatic, the yen could give back its gains quickly.

GBP

The British pound bucked the trend of broad dollar strength and is up nearly half a percent versus the greenback.  The sterling has benefited as U.K. Prime Minister Boris Johnson is set to hold talks with European Commission President Ursula von der Leyen to come to a Brexit agreement.  This has been spun as an intervention from the top-level of government and has lifted the currency.  The move in the sterling could be short-lived, however, if the talks do not produce progress.  Earlier this week, von der Leyen announced legal again against the U.K.

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