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Weekly Market Digest
October 12 to October 16, 2020

Don Curren October 16, 2020

COVID-19 case counts around the world surged this week, with Europe in particular suffering a sharp resurgence, while hopes for more fiscal stimulus in the US, considered critical to help sustain the flagging economic recovery, were all but extinguished.

In addition to the existing chasm between Democratic and Republican positions on stimulus, a gap between GOP Senate Majority Leader Mitch McConnell and the White House was in evidence this week, with McConnell reiterating Thursday he won’t put a large fiscal stimulus package on the Senate floor.

That seemed to put a serious obstacle in the path of an effort to bridge the gap between Republicans and Democrats signaled by President Donald Trump when he authorized Treasury Secretary Steven Mnuchin to go above the $1.8 trillion offer the White House had previously made, bringing the Administration closer to the $2.2 trillion proposal floated by the Democrats.

Hopes for another stimulus deal had been helping prop up stocks and other risk-sensitive assets in recent weeks, and the fading prospects for a package put pressure on equities on Thursday and helped the safe-haven US dollar achieve a 0.9% advance over  the week as a whole, according to the trade-weighted DXY index.

The greenback’s gains were also likely fueled by a continued escalation of new coronavirus cases around the world. Particularly discouraging was a surge of new infections in many parts of Europe, a continent which had in large part seemed to bring the spread of the disease under control earlier in the year.

The Wall Street Journal reported on Wednesday that the 27 countries of the European Union and the U.K. recorded 78,000 cases a day on average over a seven-day period ending on Oct. 12, or 152 cases for every million residents, surpassing the roughly 150 for every million residents in the US for the same period.

Under the shadow of climbing COVID-19 case counts, the fractious US election campaign continued, with opposing televised “Town Hall” events on Thursday night featuring President Trump and former vice president Joe Biden. Polls continued to favor Biden, on the whole, while Trump campaigned vigorously, visiting North Carolina, Florida, Georgia, Nevada, Michigan and Wisconsin during the course of the week.

Economic data released late in the week suggested US households have remained relatively confident and inclined to spend despite the rampaging coronavirus and the turbulent politics. Data released by the Census Bureau Friday morning showed retail sales volumes increased 1.9% in September after a revised 0.6% increase in the prior month. Consensus estimates had been set at +0.7%. Also on Friday, the University of Michigan said its preliminary Consumer Sentiment Index (CSI) for October beat expectations coming in at 81.2 against a predicted 80.2.

The data calendar for next week is notably light, and the focus of currency markets is likely to remain fixed on the progress of the COVID-19 pandemic and the tumult of US politics.



Suggested Reading   |   Cambridge Market Analysis

■ US Consumer Price Pressures Subdued In September  read article
■ US Jobless Claims Take Two Steps Back as Stimulus Talks Collapse  read article
■ V-Shaped Rebound in Retail Sales Continues  read article
■ Sentiment Data Suggest US Consumers More Confident as Election Looms   read article



Suggested Reading   |   Counterparties

■ Bloomberg: Economists are Starting to Think Like Engineers  read article
■ CD Howe Institute: COVID-19: We Have Met the Enemy, and It Is (in) Us  read article
■ AP: US jobless claims rise to 898,000 with layoffs still high  read article
■ WSJ: Europe Overtakes U.S. in New Cases of Covid-19  read article
■ MIT Technology Review: Room-temperature superconductivity has been achieved for the first time  read article
■ FT: Local news is drowning in ‘pink slime’ ahead of US election  read article
■ LSE Business Review: Can Europe’s Green Deal be a growth strategy?  read article
■ Nikkei: US rush for China state bond sale paves way for more borrowers  read article
■ VoxEU: The Federal Reserve and quantitative easing: A boost for investment, a burden on inflation  read article
■ MarketWatch: Dr. Fauci: ‘This is an outbreak of historic proportions, the likes of which we’ve not seen in 102 years’  read article



Calendar for the Week Ahead


Monday, October 19
■ CNY – Foreign Direct Investment
■ CAD – Bank of Canada Business Outlook Survey


Tuesday, October 20
■ USD – Housing Starts


Wednesday, October 21
■ GBP – Inflation Rate
■ CAD – Consumer Price Index


Thursday, October 22
■ USD – Jobless Claims
■ JPY – Inflation Rate


Friday, October 23
■ GBP – Retail Sales



Don Curren
Market Strategist and Content Editor