5th November 2020 - Choppy conditions likely to remain as the US election result still unknown


Good Morning,

Market Headlines

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%.

Currency

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

AUD Thoughts

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

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