• USD trades mixed to lower as sentiment improves ahead of NA session.
• CAD follows broad dollar mood to trade slightly higher.
• EUR trades slightly weaker after quiet overnight session at home.
• GBP out-performs Bailey pushes back on negative rate bets.
• JPY is lifted by cautious risk tone but remains short of yesterday’s high.
• AUD reverses sharp decline on Debelle’s comments on further easing and FX rate.
• MXN steady with little support from crude oil prices and on mixed risk tone.
FX Market Update - The USD’s gains for September accumulated through the early
overnight session with markets now taking a bit of a USD-negative tinge as the NorthAmerican session approaches. The market mood nevertheless remains cautious ahead of a turbulent months-long period of US politics and a (possible) second-wave of COVID-19 contagions in a handful of key economies that is already leading to the re-imposition of containment measures. As Republicans and Democrats expense their political efforts on the empty Supreme Court seat, stimulus progress is likely to be halted—and with it a more pronounced slump in economic output—until past the election or the beginning of the next presidential term in January. What’s more,
Democrats will likely see their stop-gap funding bill rejected in the Senate which could result in a government shutdown beginning on Oct 1. The continued risk-off sentiment in markets has again led to an out-performance of the JPY (+0.2%) while the under-performers losers among the majors are not necessarily centred on the
usual high-beta suspects; the MXN and the CAD are practically flat at writing with the NZD a bit better bid (+0.2%). The AUD (+0.1%) fell briefly below the 0.72 mark on the broad dollar-positive momentum in early-hours trading but also following comments by the RBA’s Debelle noting that the bank’s board “continues to assess other policy options”. He did highlight that the AUD is ‘around fair value’ while
conceding that additional easing would act against the currency which “would be beneficial for the Australian economy”. WTI crude oil has moved back to just around the $40/bbl mark with a 0.8% climb after yesterday’s sharp 4.4% drop. The GBP (+0.3%) and EUR (flat) are following the market’s swings. The key Asian stock markets ended in the red for the day (roughly -1%) while European equities are
trading around 1% higher on average and US stock futures are mixed. It is a relatively quiet North American session on the data front, with a series of central bankers on tap during the day set to influence the market mood, namely Powell (feat. Mnuchin) before the House financial services panel at 10.30ET (prepared remarks published last night did not surprise). The RBNZ announces its policy decision tonight, with no change expected to its policy levers.
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