Global equities remain under a cloud, but with limited impact on FX markets. US dollar weakness has cycled away from the majors to EM currencies in recent weeks, and Asian currencies have benefitted. China kept its loan prime rates steady today, while South Korea's advanced September exports indicated further recovery in global trade. Meanwhile, the coronavirus upsurge in Europe is worsening, and social restrictions have been gradually re-imposed in several regions.
Week ahead: It is another week with Fed Chair Powell on centre stage. If there was anything missing from the post‐FOMC press conference last week, Powell will be able to clarify in his testimonies at the House and Senate (Tuesday through Thursday). The key US data releases are existing home sales (Tuesday), new home sales (Thursday), and durable goods orders (Friday). Central bank meetings in New Zealand and Europe this week are expected to result in steady policy settings.
CAD: Fiscal policy is in focus with Wednesday’s Speech from the Throne providing direction for the upcoming legislative session. It is not clear how much of the additional spending plan touted by the governing Liberals will be for the current fiscal year, which has a massive deficit estimate equivalent to around 16% of nominal GDP. The minority Liberals will need the support of at least one of the three major opposition parties, which we expect them to get, in order to pass the Throne Speech, as it will be subject to a confidence vote. If it does pass, then a fall fiscal update with more costing and timing details should follow, likely in October.
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