Yesterday was an indecisive day for the loonie as it almost mirrored Wednesday’s trading session. USDCAD fell 0.08% from open-to-close in yesterday’s session, reversing the 0.13% rise witnessed on Wednesday, with very little coming out in terms of news after an election was averted. In Ontario and Quebec, case count data yesterday saw little progress being made under the new 28-day lockdown. Quebec continues to post over 1,000 new cases a day, while Ontario’s figure still fluctuates around the mid-800s. With little pencilled in for today in Canada, eyes will be on the progress of fiscal stimulus talks in the US and preliminary PMIs from the states which are released at 14:45BST.
Yesterday’s price action saw the dollar drag itself by the bootstraps from one-month lows. “Just about there” rang through markets as Nancy Pelosi signalled that herself and Treasury Secretary Steven Mnuchin are close to clinching a stimulus deal, helping buoy the dollar. The two parties are near reaching an agreement for money to be spent on testing and tracing to safely reopen schools and the economy but haven’t settled on key sticking points such as state and local government aid. Additionally, while Mnuchin is bargaining on behalf of the Republicans, this by no means suggests the support of Mitch McConnell and the GOP in the Senate will be forthcoming. The road ahead for fiscal support remains rocky, with the election just 11 days away now. On the topic of elections, last night’s second debate between President Trump and nominee Biden struck a much calmer tone than the first. The polls barely moved due to the debate, with FiveThirtyEight still having Biden ahead with a 9.9% lead at 52.1%. With around 45-48m votes already cast via postal ballots, the debate has less of an effect on the overall outcome than during previous elections. Today, for the dollar, the focus will be on how stimulus talks progress along with the economy as preliminary PMI data for October will be released at 14:45BST.
Yesterday saw the euro drop 0.36% against the dollar as the greenback broadly bounced from its big sell-off on Wednesday. Traders signalled that there was an element of profit-taking in the euro price action yesterday, with data signalling that Spain and France were the first countries in western Europe to surpass 1 million Covid-19 cases. This morning, the single currency sits back in the green, as does the whole G10 currency board, despite the flash services PMI for the currency area underperforming expectations. Released at 09:00 BST, flash PMI readings from the eurozone for October saw the service sector underperform expectations by 0.8 points with a reading of 46.2 – a reading that still points to a contracting service sector – while the manufacturing PMI saw a strong beat at 54.4 vs expectations of 53.0. The manufacturing reading allowed the composite PMI to print above expectations at 49.4, just shy of the breakeven 50 mark that needs to be surpassed to signal a growth in output. This morning’s other major release will be flash purchasing managers indices for October at 09:30 BST.
Sterling is currently trading some 0.3% higher than last Friday morning, which is appropriate given the merry-go-round that has occurred in Brexit news flow since then. Last Friday afternoon, Boris Johnson ostensibly broke off Brexit talks. Talks resumed yesterday and will continue every day until a deal is done – leaving sterling broadly unchanged. This morning saw the release of UK retail sales data, which showed a solid 1.5% expansion in headline sales in September, more than seven times the median forecast submitted to Bloomberg. The September boost to sales was driven by a 4% rise in non-food store sales, which are now 1.7% above their pre-Covid levels, from February. Clothing retailers were a notable laggard, with sales more than 12% below pre-Covid levels. Despite the strong, even v-shaped recovery in consumer spending, unemployment is likely to increase significantly in the future, in turn impacting household incomes.