October 20: Overnight Market Wrap

October 20: Overnight Market Wrap

Key Points:

US stocks close lower as stimulus hopes fade

UK/EU still at loggerheads over Brexit deal

Mixed day for the USD as DXY closes at 93.40

The start of the week saw some enthusiasm around a stimulus deal as Trump’s hot air indicated he wanted a ‘bigger’ deal than Pelosi was asking for. Talks during the US session showed cracks are still there and time is running out for a deal to be agreed by Tuesday’s Democratic imposed deadline. The USD has closed lower but off of its lows  earlier in the day which saw risk given a lift driving Gold back to 1918 and all US indices futures stronger before the opening. Risk sentiment dived towards the end of the day as leaks around the talks filtered through. All major indices closed down Nasdaq -1.65%, S&P500 -1.63% and DJ -1.44%, the Russell fared slightly better just under 1% down on the day. Gold eventually closed at 1903, up $4 on the day. For currencies, the commodity bloc fared better following the stock markets but turned back down with the slump. AUD failed again at 0.7110 closing back at 0.7060 as we await the minutes from the RBA later today. With Lowe firmly putting a cut to 0.1% on the table during his speech last week, it’s unlikely that we will learn anything new today ahead of the rate decision on 3rd November. Of note was AUD/NZD’s move back below 1.0700 a three month low reflecting expected rate differentials between the antipodeans. GBP continued its Brexit rollercoaster pushing above 1.30 at one point but the optimism faded and fell back to 1.2940 aided by the USD rebound. EUR had a good day in comparison closing up at 1.1775 above the 200HMA at 1.1760, however would need a firm push through 1.1825/30 to regain it’s recent rally. ECB comments that they stand ready to use further tools if required due to virus escalation had little impact on the price as more countries go into lockdown with Ireland the latest to impose a 6 week close nationally. The diary is light today apart from the RBA so the focus will be back on stimulus talks later today and further Brexit news.

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