SMATS FX Weekly Market Report | Monday 09 November 2020

USD

With the former US Vice President Joe Biden taking the helm in the US after successfully negotiating a comfortable victory in the US elections. Donald Trump has now launched a barrage of legal campaigns and accusations saying that the vote was rigged as he demands a recount. The USD soured throughout last week as the world braced for what would be a bumpy election. FOMC members will be giving speeches throughout the week with Tuesday playing host to Robert Kaplan, Randal Quarles and Lael Brainard. Election news will continue to spill out throughout the week and any contested results is likely to aid risk aversion.

Influences on HKD, SGD & AED

Our exotic currencies were hit hard by the US elections as investors fled the Greenback, in the absence of any real domestic data reports and the expectation of some backlash following the election, the currencies are expected to move inline with USD action.

AUD

The Aussie Dollar had a stellar week last week as it benefitted from a risk-on sentiment and anti-Dollar movements while the US elections took centre stage. Risk sentiment is likely to be a theme of the week as the markets settle down after Joe Biden takes the helm in America. NAB business confidence index and the Westpac consumer confidence index are both expected to improve this week, the former from -4.0 to -3.0 and the latter to inch up to 108.00 from 105.00. China will be releasing their CPI and PMI numbers on Tuesday which could impact AUD pairs, both of which are expected to fall.

NZD

Much like its AUD counterpart, the Kiwi Dollar strengthened substantially throughout the week but this week the Reserve Bank of New Zealand will be making their policy decision after making no changes last month despite hinting at further easing. On Wednesday, market analysts expect the central bank to keep rates at 0.25% but Governor Orr is expected to unveil a funding for lending program that will allow for lower retail lending rates. US election news will continue influence the NZD as the demand for higher-yielding currencies will be affected.

EUR

The Euro took its cues from overall risk-sentiment last week as a bunch of European countries go back into lockdown this week, investors will focus on the region’s recovery trends. Speeches from the European Central Bank will likely hint at further easing in December as emphasis has been put on downside risk for the Euro. The UK and European reps will meet this week as they look for compromises to make a level-playing field in the key issues of British fishing waters and environmental protection. Germany and the Eurozone will be releasing their ZEW economic sentiment, both of which are expected to plummet.

GBP

Brexit updates are likely to drive the Pound’s value this week as reps from both the United Kingdom and Europe will resume their Brexit talks in London this week. With the UK now in a hard lockdown, UK data reports will be significantly more important as we assess how the economy copes with the restrictions. The Labour market numbers are due out on Tuesday, it is expected that the unemployment rate will rise from 4.1% to 4.5% which will be a net of 140 000. Preliminary GDP numbers are due out on Thursday, the economy is expected to have grown by 15.5% in Q3 after dropping by 19.8% in the 2^nd quarter. Strong numbers here could have a subdued impact as they reflect pre-lockdown figures.