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The Weekly Wrap – U.S Election Results Sink the Dollar, while Supporting Riskier Assets

Out of the U.S

It was another busy week on the economic data front.

In the 1st half of the week, ISM Manufacturing and Service PMI and ADP Nonfarm numbers were in focus.

It was a mixed bag for the Dollar, however.

While manufacturing sector activity picked up in October, service sector activity saw slower growth.

The all-important ISM Services PMI slipped from 57.8 to 56.6.

ADP nonfarm employment change figures also suggested another speed bump in the labor market recovery. In October, the ADP reported 365k nonfarm payrolls added. This was well short of a forecasted 650k and September’s 749k.

On Thursday, the weekly jobless claims also disappointed, with claims standing at 751k in the week ending 30th October. This was down marginally from a previous week 758k.

At the end of the week, nonfarm payrolls and unemployment numbers provided some hope.

The unemployment rate fell from 7.9% to 6.9%, with 638k nonfarm payrolls added in October.

On the monetary policy front, the FED left rates unchanged at 0.25%, which was in line with expectations.

Neither the FED nor the stats influenced, however, with the U.S Presidential Election the key driver.

In the equity markets, the NASDAQ surged by 9.01%, with the Dow and S&P500 seeing gains of 6.87% and 7.32% respectively.

Out of the UK

It was a relatively quiet week on the economic data front. Finalized private sector PMIs, construction PMI, and house price figures were in focus.

While there was an upward revision to the manufacturing PMI, a downward revision to the services PMI disappointed.

October’s Construction PMI also fell short of expectations, with the PMI falling from 56.8 to 53.1. Economists had forecast a fall to 54.0.

House price figures had a muted impact in the week, however.

On the monetary policy front, the BoE was in action. While holding interest rates steady, the BoE cranked up its QE by an additional £130bn to £875bn.

With England now in lockdown mode for a month, the prospects of negative rates remain. Much will depend on the outcome of Brexit negotiations, however. The decision to hold rates steady provided the Pound with support on Thursday.

Hopes of a Brexit deal by next week and a slump in the Greenback also supported the Pound in the week.

In the week, the Pound rallied by 1.61% to $1.3156. In the week prior, the Pound had fallen by 0.71% to $1.2947.

The FTSE100 ended the week up by 5.97% reversing a 4.83% loss from the previous week.

Out of the Eurozone

It was a particularly busy week on the economic data front.

In the 1st half of the week, October’s private sector PMIs were in focus.

Finalized manufacturing numbers for France, Germany, and the Eurozone all came in ahead of prelim figures. Italy and Spain also reported a pickup in manufacturing sector activity.

Service sector activity continued to disappoint, however. Both Italy and Spain saw service sector activity contract at a quicker pace amidst the 2nd wave of the COVID-19 pandemic.

The Eurozone, France and Germany’s services sector also continued to contract.

Thanks to a pickup in manufacturing sector activity, however, the Eurozone’s private sector avoided a contraction. The Composite PMI came in at 50.0 for October.

In the 2nd half of the week, German factory orders and industrial production figures were in focus.

Both sets of numbers fell short of forecasts, though both were on the rise in September.

While there were plenty of stats to consider, the upside for the EUR came off the back of the U.S Presidential Election.

A Joe Biden victory is considered positive for both the EUR and the European majors.

For the week, the EUR rallied by 1.95% to $1.1874. In the week prior, the EUR had fallen by 1.80% to $1.1647.

Away from the economic calendar, the continued rise in new COVID-19 cases and new lockdown measures remained negative.

For the European major indexes, it was a bullish week. The DAX30 and CAC40 rallied by 7.99% and by 7.98 respectively, with the EuroStoxx600 gaining 7.02%.

For the Loonie

It was another relatively quiet week on the economic data front.

Key stats included September trade figures and October employment and Ivey PMI numbers.

It was a mixed bag for the Loonie. A widening of the trade deficit and weaker than expected employment figures were Loonie negative.

A pickup in the Ivey PMI was the only positive, though the employment figures drew greater interest.

Market reaction to the U.S Presidential Election and a jump in crude oil prices supported the Loonie, however.

In the week ending 6th November, the Loonie rallied by 2.03% to end the week at C$1.3050. In the week prior, the Loonie had fallen by 1.49% to C$1.3321.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 6th November, the Aussie Dollar rallied by 3.27% to $0.7258, with the Kiwi Dollar rising by 2.40% to end the week at $0.6774.

For the Aussie Dollar

It was a relatively busy week on the economic calendar.

Key stats included September retail sales and trade data and October manufacturing numbers.

The stats were skewed to the positive, though a continued decline in retail sales was a concern in the week.

On the monetary policy front, the RBA delivered a rate cut and further policy measures to support inflation and employment.

The RBA also released its Statement on Monetary Policy upwardly revising growth, inflation, and employment forecasts.

For the Aussie Dollar, however, the upside came off the back of the U.S Presidential Election.

For the Kiwi Dollar

It was also a relatively quiet week on the economic calendar.

Key stats included 3rd quarter employment and inflation expectation figures.

The stats were skewed to the negative. While better than forecasts, the unemployment rate rose from 4% to 5.3% as a result of a 0.8% fall in employment.

Inflation expectations were positive, however, with an upward trend in inflation forecasts continuing in the 4th quarter.

With the RBNZ in action next week and the U.S Dollar on the slide, however, it remains to be seen whether the inflation numbers are good enough… There could be some jawboning ahead.

For the Japanese Yen

It was a relatively quiet week on the economic calendar.

Key stats included finalized private sector PMIs for October and household spending figures for September.

Upward revisions to private sector PMIs were positive, with household spending getting a boost in September.

Both the manufacturing and services sectors continued to contract in October, however.

The Japanese Yen rallied by 1.25% to ¥103.35 against the U.S Dollar. In the week prior, the Yen had risen by 0.05% to ¥104.66.

Out of China

It was a week on the economic data front.

The market’s preferred Caixin private sector PMIs for October were in focus.

A pickup in private sector activity supported riskier assets and the positive outlook towards the Chinese economy.

The manufacturing PMI rose from 53.0 to 53.6, with the services PMI rising from 54.8 to 56.8.

For Yuan, a Trump loss in the U.S Presidential Election would be a boost and ultimately supported the upside in the Yuan.

In the week ending 6th November, the Chinese Yuan rose by 1.18% to CNY6.6125. In the week prior, the Yuan had fallen by 0.07%.

The CSI300 rose by 4.05%, with the Hang Seng ending the week up by 6.66%.


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