Risk Bid as Stimulus Talks Approach Deadline

Market Drivers October 20, 2020

  • Equities remain bid on stimulus hopes
  • EU inflation rises
  • Nikkei -0.44% Dax -0.26%
  • UST 10Y 0.77
  • Oil $41
  • Gold $1900/oz
  • BTCUSD $11725/oz.

Asia and the EU

  • EU PPI 0.4%

North America Open

  • USD Housing Starts 8:30

It’s been a very quiet night of trade in the markets with FX essentially marking time but equities remained bid with Nasdaq futures up by more than 50 basis points as investors still anticipated some positive news on stimulus talks in Washington DC.

Stocks slid for most of the day yesterday as prospects for a deal before the election dimmed, but after the market close in New York, the office of House Speaker Nancy Pelosi released a statement that Mnuchin and Pelosi “continued to narrow their differences” and that she should have some clarity before the end of the day today.

The prospects for an actual deal still remain minuscule as the Republicans in the Senate vehemently oppose the size of the stimulus discussed, but hope runs eternal in the markets and investors continue to remain optimistic that if some sort of deal is reached between the White House and the House of Representatives then the momentum and pressure from Trump will force the Senate to cave and approve the package.

Although the price action remains muted in Europe, volatility is sure to increase as we near the self-imposed deadline by the New York close, and equities could see significant swings as the day proceeds.

Meanwhile, in FX the price action is very muted with only Aussie seeing some movement as the pair continues to feel the downward pressure on the prospect of zero-interest policy. Still, some analysts feel the sell-off is overdone especially if global risk flows continue to push higher and Chinese growth picks up pace helping Australia’s commodity exporters. For now, the .7000 figure remains the Maginot line between the shorts and the longs, and the longer it holds the better the prospects that the pair may have found a near term bottom.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Boris Schlossberg

Mr. Schlossberg is a regular contributor to CNBC's Squawk Box and a commentator for CNBC Asia and CNBC Europe. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Mr. Schlossberg has written for SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is the author of Technical Analysis of the Currency Market and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game, both of which are published by Wiley

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