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Last week’s news

• Britain agreed to lift its block on negotiations, prompting the biggest rally for the GBP since March this year. The breakthrough came after an hour-long call between David Frost, the UK Brexit Secretary and Michel Barnier, with both sides agreeing to resume face-to-face talks. Negotiations have been on thin ice since Boris Johnson’s decision to demand a ‘fundamental rethink’ from Brussels before allowing further discussions. Mr Barnier and Lord Frost agreed a 10-point plan for this ‘next and final phase of the negotiations’ including working through weekends and establishing a small joint secretariat to hold a master consolidated text.
• Factories across Europe are bouncing back with increased activity once again, encouraging some industrial bosses to invest in extra production as they shrug off the rise in coronavirus infections that is casting a shadow over the continent’s recovery. By August, German factory orders had almost reached pre-pandemic levels while Italian industrial production was already back to last year’s levels. A key part of Europe’s manufacturing sector is the car industry. Although sales are down 29% this year, they are rebounding strongly – boosted by state subsidies for electric and hybrid vehicles, particularly in
• France and Germany. This, alongside China and Asia’s surge in demand again for European goods, will hopefully keep the EU ticking along.
  The US dollar index fell over 1% over the last week as risk and US stocks edged higher. Uncertainty, including deteriorating US-China relations, US elections, no-deal Brexit risks, and the latest developments on Europe’s and US’ virus numbers, will hang over the markets in the coming weeks against the possibility of a vaccine and positive corporate results. Uncertainty might push volatility higher, which could bring support to the Greenback.
• A top US intelligence official warned at a conference last week that Iran and Russia were attempting to influence American voters just two weeks from the November 3rd Presidential Election. John Ratcliffe, the Director of National Intelligence, said both countries had obtained ‘voter registration information’ and that Iran had sent emails designed to ‘intimidate voters, incite social unrest and damage President Trump’. The announcement appeared to be connected to a wave of emails sent to Democratic voters disguised as being sent from The Proud Boys far-right wing group, which urged their recipients to vote for Mr Trump ‘or else’, according to US media reports. So far, no solid proof has been given that the emails originated from Russia or Iran and a spokesman for the Iranian Mission to the UN told ABC News ‘Iran has no interest in interfering in the US election and no preference for the outcome’.

Looking ahead

• Increasing expectations of a “blue wave” (where democrats would make major gains in the Chamber of Congress and the White House) are aligned with the resilience of the EUR/USD pair. The EUR/USD pair is trading above 1.1850 again, a 1.21% increase over the last 5 days. Euro bulls (EUR/USD pair) are hopeful for the next bull leg to the upside. As long as the virus is contained in Europe and there is a quiet US election process, the EUR/USD pair might visit the 1.2000 level again and then possibly the 1.2500 handle that was tested back in February 2018. Fundamentally speaking, a democratic win would be linked with the hope of large-scale fiscal stimulus next year and a less adverse foreign policy approach. For now, Biden is at 50.8% and Trump is at 42.8%, according to the average of national polling data produced by Real Clear Politics.
• The AUD posted a slight recovery last week, able to close above 0.7120 in line with broad USD weakness. The AUD struggled to break above its short-term resistance around 0.7150 influenced by speculations of a rate cut by the RBA on their next meeting, at least based on last week minutes. RBA assistant Governor Michelle Bullock will give a speech on Tuesday, and we get inflation data on Wednesday.

Key market events this week

• USD Durable Goods Orders MoM (Sept) – Tuesday
• USD CB Consumer Confidence (Oct) – Tuesday
• AUD Inflation Rate YoY (Q3) – Wednesday
• Bank of Canada Interest Rate Decision – Wednesday
• Bank of Japan Interest Rate Decision – Thursday
• USD GDP Growth Rate QoQ (Q3) – Thursday
• ECB Interest Rate Decision & Press Conference – Thursday
• EUR Core Inflation Rate YoY (Oct) – Friday
• EUR GDP Growth Rate YoY (Q3) – Friday
• USD Core PCE Price Index YoY (Sept) – Friday
• USD Uni of Michigan Sentiment Index (Oct) – Friday