SMATS FX Weekly Market Report | Monday 2 November 2020

USD

US Dollar traders are in for an extremely busy week as the FOMC make their policy statement on Thursday, Friday sees the release of the US jobs data and the highly anticipated US elections are set to take centre stage. The best case for risk appetite would be an uncontested result which would ensure a smooth transfer of power. Fed Powell are not expected to make any policy changes, it is expected that the statement takes the back seat to the elections this week. Non-farm payrolls are expected to show an increase of 510 000 jobs in October while the unemployment rate should fall from 7.9% to 7.7%.

Influences on HKD, SGD & AED

This week our exotic currencies are going to be driven by the USD as usual but we do have some key releases out of Singapore this week, their SIPMM manufacturing PMI is expected to drop from 50.3 to 50.0, markit PMI on Tuesday is expected to climb up to 46.0 from 45.1 and their retail sales for September should rise by 2.2%. Hong Kong will be releasing their markit PMI for October on Wednesday, it should rise from 47.7 to 48.0. It is expected that the United Arab Emirates’ inflation rate will check in at -1.5%.

AUD

This is expected to be extremely choppy for the Australian Dollar with the Reserve Bank of Australia expected to cut interest rates on Tuesday. Market analysts expect to see a rate cut from 0.25% to 0.10% but due to the relative uncertainty surrounding the decision, the Australian Dollar is expected to remain volatile. Retail sales are expected to jump by 6% for the 3^rd quarter when it is released on Wednesday while the trade balance should show a tighter surplus as imports outpace the exports. Chinese PMMI data is expected to move the AUD in the short term, there are two releases, one during Monday’s Asian session and the other during Wednesday’s Asian session.

NZD

Risk aversion caused the NZD to tank last week but we have a busy week in the markets to turn things around for the Kiwi Dollar. New Zealand’s quarterly unemployment rate is expected to jump to 5.4% because of the lockdowns. Risk sentiment is expected to guide the NZD this week with the US elections influencing risk taking, as well as the NFP report on Friday and policy decisions from the BOE, RBA and FOMC.

EUR

Negative comments from the European Central Bank and new lockdown restrictions weighed on the Euro last week and without any major data reports out of Europe, it will largely be down to overall risk sentiment and Euro demand to drive the single European currencies’ value this week. Euro downside potential is evident after France and Germany announced their lockdown plans and the Central Bank shared its plan to ease policies in December. Eurozone retail sales is expected to dip by 1.4% when it is released on Thursday, this could see the Euro take a slight dip when the data is released.

GBP

Without a Brexit deal in sight, the markets will be reacting to the Bank of England’s possible expansion of their quantitative easing program. On Thursday, the BOE will be making their policy decision and analysts don’t expect any more negative rate talks until there are some Brexit developments. Market risk sentiment is expected to drive the markets this week with the US election results set to lead rallies throughout the week and rising COVID-19 cases can impact the global risk sentiment.