USD: It should be another challenging day for most currencies. Risk assets are yet again under pressure after the announcement that President Trump has tested positive for Covid-19 while the little progress made on the next round of the needed US fiscal stimulus is also adding to the uncertainty. On the latter, although the USD 2.2 trillion package was passed in the Democrat-controlled House of Representatives, there is still no agreement with Republicans, with one of the key contested issues being the size of weekly job insurance. On the data front, the focus turns to the Sep US employment report. Economists are looking for slightly sub consensus NFP (+850k) with some additional downside risk stemming from the confusion over in-person and remote schooling. This could add to the sense that the recovery is stalling and is unlikely to be of much help to risk assets today. Rather, it should reiterate the negative trend overnight.
CAD: Has made a little further progress against the softer USD through the overnight session. There is no domestic news or developments to note. Canada releases August leading indicators and September PMI data yesterday suggested some flattening out in Canada’s mid-year rebound but the risk backdrop is set to remain the overall focus for markets.
EUR: EZ Sep inflation should point to weak price dynamics with another soft-core CPI figure (expected at 0.4% YoY) keeping rate cut expectations alive. That said, most see the extension of the asset purchase programmes (PEPP or PSPP) as more likely to fight below target inflation. With negative risk sentiment in place, EUR/USD should re-test the 1.1700 level today.
GBP: Volatility is on the rise, further induced by contrasting reports from the UK-EU negotiations. EU Chief Brexit negotiator Barnier meets UK Chief negotiator Frost today, meaning that headline news on the state of (lack of) progress in negotiations will continue to induce GBP volatility today. Based on most estimates, only limited risk premium is priced into GBP
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