October 6: Overnight Market Wrap

October 6: Overnight Market Wrap

Key Points:

Trump leaves hospital to return to White House

US ISM better than expected aiding risk

US stocks close higher, USD weaker

Risk is firmly on as markets digest the likelihood of a deal between the Democrats and Republicans for the next round of stimulus as Mnuchin and Pelosi continue their daily meetings. Anticipation is that this ‘free’ money will flow straight to risk investments and markets love to get ahead of the curve. Trump is way behind in the polls which means he will push to get a compromise with the Democrats before the election, if not and Biden wins then the Democrats will press ahead with their stimulus plans anyway, either way it’s driving markets to conclude there’s more money coming. Oil grabbed the headlines surging over 6%, Gold after dipping from 1900 to 1887 spiked up $30 to fall just shy of 1920 on the day. Better than expected PMI data across Europe and the UK gave both EUR and GBP some legs to move higher with EUR breaking back above recent resistance at 1.1770 as the greenback weakened across the board. US ISM services came in better also at 57.8 from 56.2 giving US yields a lift but there was no follow through into USD as the DXY closed down around 93.50. Trump left the hospital and headed back to the White House telling the world ‘don’t be afraid of Covid’ alarming most scientists and doctors around the globe yet at the same time completely unsurprising given his lackadaisical approach to the virus since day one. US stocks all surged higher shrugging off Fridays ‘Trump Virus’ sell off with the Nasdaq reversing it’s Friday loss completely and the Small Cap the best performer up 2.7%. NZD, CAD and AUD all underperformed surprisingly with the NZD the worst performer, the CAD couldn’t benefit from the WTI rally and AUD on hold ahead of the RBA meeting and Budget announcement later today. The likelihood is that the RBA will disappoint the doves despite weaker data recently and we will see AUD play catch up towards 0.7230 likely dragging the NZD with it. Prior to the rate decision we will get a look at Australian trade data unlikely to cause a stir. During the European session we will hear from Lagarde and then later Fed’s Powell so we could see some volatility around those two events.

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