USD: The greenback seems trapped between China’s recovery and a European double-dip. The highlight of the week may be Thursday’s presidential TV debate – a last chance for the President to make a meaningful inroad into Biden’s lead. Since we put that preview together, Nancy Pelosi has set a Tuesday deadline for agreeing on a meaningful fiscal stimulus. That may keep risk assets supported a little more. What stands out at the moment, however, is the divergence in the international growth story – as evidenced by 10-year government bond yields. Looking at ranges over the last six months, Chinese yields (3.20%) are on their highs – supported by China’s industrial recovery. US yields (0.75%) are slightly above their six-month average supported by the stronger recovery story and the prospects of more stimulus. German yields (-0.63%) are currently plumbing new lows as Europe braces for a double dip recession.
CAD: Look out for the BoC’s 3Q business outlook survey today – a summary of interviews with over 100 Canadian firms. This will be an important input into the BoC’s policy meeting on October 28th. Money markets currently price the policy rate flat at 0.25% over the next 12 months. Any upbeat sentiment from the report could see the CAD appreciate in the short term. Also look out for any headlines from today’s OPEC+ JMMC meeting.
EUR: The ECB’s Lagarde and Lane speak at an ECB conference on monetary policy this afternoon. Expect further remarks regarding their monetary policy strategy review and the possibility of following the Fed into some kind of average inflation targeting – or at least adopting a symmetrical inflation target. European interest rates are already on the floor, but as Europe braces for a return of national lockdowns, EUR/USD support at 1.1690 looks vulnerable.
GBP: UK Minister Gove yesterday said that the door remains ‘ajar’ for trade talks with the EU and the focus today may be on whether the House of Lords starts watering down the contentious Internal Market Bill – creating a better negotiating environment with Brussels. Should the government not resist such changes, one could infer the government is more minded towards a deal.
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