The tight race for the US election led to choppy markets yesterday although risk ultimately traded higher as probabilities shifted toward a Democrat victory. This morning markets have Joe Biden at 80% likelihood of winning, however, a final result is still likely some time away. Bond yields also dropped on the receding chances of large-scale fiscal stimulus. The S&P 500 was up +1.5%, while the NASDAQ was the star performer being up 3.6% in late trade. US 2yr treasury yields fell from 0.16% to 0.14%, while the 10yr yield fell from 0.85% to 0.76%. Commodities, Brent crude oil futures rose 3.5% to $41.10 after lower reported inventories as well as signals of production cuts, copper rose 0.5%, iron ore is unchanged at $117.10, and gold fell 0.8%.
AUD/USD: 0.7060 – 0.7198 (a three-week high)
EUR/USD: 1.1629 – 1.1745
GBP/USD: 1.2915 – 1.3050
USD/JPY: 104.16 – 105.09
USD/CAD: 1.3109 – 1.3298
NZD/USD: 0.6618 – 0.6707
AUD/JPY: 74.03 – 75.20
AUD/NZD: 1.0662 – 1.0737
Choppy conditions are likely to remain as the market awaits clearer results from some key states in the US Presidential election. A final result could still be days away as votes continue to be counted and the prospect of recounts and legal action gains momentum.
AUD/USD traded in a 0.7049/.7223 range yesterday with the global order books cleared in both directions. Demand has likely returned in the 0.7130/40 region as markets adjust to a Biden victory, while offering interest should be expected above 0.7250.
Event Risk Data Today
Australia: Market expects the trade surplus to widen in September to $5.2bn as imports pull-back and exports lift (market f/c: $3.7bn).
NZ: Domestic activity indicators have been picking up, supporting ANZ business confidence in November (prior: -15.7).
Euro Area: The rebound in retail sales will stall in September as containment measures to manage COVID-19’s resurgence are instituted (prior: 4.4%, market f/c: -1.5%).
UK: The BoE will take careful note of growing downside risks at its policy meeting as England begins its second nationwide lockdown.
US: The market expects initial jobless claims to fall slightly from 751k to 735k.
US: The FOMC’s November meeting will conclude today; we expect the meeting communications to focus on risk and uncertainty rather than the positive Q3 GDP result