Morning Commentary: Cloudy With a Chance of Sunshine

Foreign Exchange - Morning Commentary
Cloudy With a Chance of Sunshine 
Share this story:
Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
Despite the gyrations in risk last week, markets remain broadly supported as polls and oddsmakers continue to predict not only a Biden victory but a Democratic sweep of Congress. Given this, it should be noted that the Biden–Trump gap has stabilized, which explains some of the consolidative nature of supported risk markets.

Should Democrats win the White House and both chambers of Congress, the expectation is for major expansion of fiscal policy and reduction in trade tensions, both of which are supportive of the markets. Conversely, the prospects of higher taxes and a more active regulatory stance represent offsets to other positive economic growth factors. For now, markets appear to be focused more on the former than the latter as the key near-term driver. Looking ahead, the markets will be keying in on Thursday’s final presidential debate, although historically, the first debate has the most impact on public opinion.

On a global level, COVID-19 concerns remain, with recent spikes in infection numbers prompting governments around the world to reimplement health/welfare-positive but growth-negative lockdown measures. However, continued support from fiscal and monetary policy supports a constructive outlook for 2021, as China’s economic rebound remains robust and as the U.S. jobs market continues to recover faster than expected. Additionally, Europe should ultimately find a common policy response, and progress continues on a vaccine. This all suggests a continuation of the global recovery, albeit with bumps along the road that will delay but not derail the recovery. 
  • House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have narrowed the gap between the two sides ahead of today’s stimulus deadline for a pre-election deal. Given this, the White House and House Democrats remain far apart. Even if Pelosi and Mnuchin are able to come to an agreement, Senate Republicans are looking for a package much smaller than the amount Pelosi and Mnuchin are negotiating. With virus numbers rising, economic activity constrained and the labor market softening, the U.S. economy needs additional stimulus, but this is unlikely to come before 2021.
  • The U.S. Senate is scheduled to vote on a stand-alone bill to allow unused funds from the March stimulus package to be used in the Paycheck Protection Program today. Tomorrow, the Senate should vote on the skinny $500 billion stimulus bill that House Democrats have already rejected.
  • Microphones at this week’s presidential debate will be muted at the top of each segment to allow each candidate two uninterrupted minutes. The microphones will be turned back on afterward to allow for discussion.
  • Regarding U.S. election voting, 37 million mail-in ballots, or 23% of all votes counted in 2016, have already been cast.
  • The Reserve Bank of Australia (RBA) released dovish minutes. In the minutes, the central bank “agreed to maintain highly accommodative policy settings as long as required and to continue to consider how additional monetary easing could support jobs as the economy opens up further.” Prior to the release of the minutes, RBA Assistant Governor Christopher Kent also made dovish comments, as he stated there was still room to compress short-term rates.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2020 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?