CFD Markets News and Forecasts — 29-10-2020

According to ActionForex, analysts at RBC Financial Group note that the U.S. Q3 GDP rose 33% (annualized) after a 31% drop in Q2, but expect the pace of recovery to slow going forward.

"The 33.1% (annualized) jump in Q3 GDP was broadly in line with expectations. The rise only partially retraces 31.4% and 5.0% declines in Q2 and Q1, respectively, leaving activity running 3.5% below its pre-shock (Q4/2019) level. The data nonetheless confirms that the initial bounce-back in activity from the spring COVID-19 related shutdowns was quicker than feared. Consumer spending bounced back 41% after falling 33% in Q2. Residential investment surged almost 60% on a bounce-back in housing markets over the summer. Business investment rose overall, boosted by machinery & equipment purchases. But nonresidential investment in structures was one remaining soft-spot, declining another 14.6% in Q3. Oil & gas exploration activity (unsurprisingly given low oil prices) fell sharply. And declines in investment in office buildings, restaurants, etc. will not quiet concerns about commercial property markets."

"And the pace of recovery is expected to slow going forward. Labour markets are still exceptionally soft. Employment has been lagging the GDP recovery (the job count was still down 6 1/2% from year-ago levels at the end of Q3). A larger share of those still off work are on permanent rather than a temporary layoff, and so will likely take longer to match with new jobs. Household incomes remain elevated thanks to remaining government support programs - disposable incomes were still up almost 8% from a year ago in Q3 despite the expiry of $600/week federal top-up unemployment insurance payments at the end of July."

According to ActionForex, analysts at Wells Fargo Securities notes that the European Central Bank (ECB) kept monetary policy unchanged at today’s announcement, but its accompanying comments were notably dovish in tone, offering a very clear signal of further easing in December. 

"The European Central Bank (ECB) announced its latest monetary policy decision today. Although the central bank held monetary policy steady, we view the announcement as notably dovish in tone, offering a relatively clear signal that further easing could be forthcoming at the ECB’s December 10 meeting."

"The ECB’s main policy tools were untouched. The central bank kept its Deposit rate at -0.50% and repeated that interest rates would remain at present or lower levels until it has neared its inflation goal. The ECB also kept the size of its Pandemic Emergency Purchases Program (PEPP) at €1,350B and said the program will run until at least June 2021. The central bank still has plenty of room for further bond buying within the current purchase envelope."

"However, the accompanying comments were very dovish in tone. The central bank said that risks were clearly tilted to the downside in the current environment, and it also said that a new round of staff economic forecasts in December will allow for a fuller reassessment of the economic outlook. The ECB said that on the basis of this updated assessment it would recalibrate its instruments, as appropriate, to respond to the unfolding economic situation. In the post meeting conference, ECB President Lagarde said policymakers agreed it was necessary to take action, essentially sealing a December move."

"After today’s ECB announcement, December monetary policy action now clearly appears to be the most likely or base case scenario. We believe the onus is on the economic data to improve perceptibly to avoid further easing at that meeting."

"... we now expect the ECB to ease monetary policy further at its December 10 announcement. Specifically, we expect the ECB to announce a €500B increase in PEPP purchases, to a total program size of €1,850B. We also expect the ECB to extend its purchase program through until at least December 2021, from June 2021. While it might not be formally announced, we also would not be surprised to see an increase in the weekly pace of purchases following that meeting. We do not expect the ECB to adjust its other asset purchase programs in December, nor do we expect any change to the current Deposit rate of -0.50%."

• Does not think U.S. recovery depends on coronavirus relief
• By early spring the US should regain all economic output that was lost during Covid 19 pandemic

Statistics Canada announced on Thursday that the value of building permits issued by the Canadian municipalities climbed 17.0 percent m-o-m in September, following a revised 1.4 percent m-o-m advance in August (originally a gain of 1.7 percent m-o-m). This was the largest gain in the value of building permits since March 2009.

According to the report, the value of residential permits rose 6.9 percent m-o-m in September, as single-family permits jumped by 8.9 percent m-o-m, while permits for multi-family dwellings increased by 5.2 percent m-o-m.

At the same time, the value of non-residential building permits surged 40.6 percent m-o-m in September, due to climbs in industrial (+49.1 percent m-o-m), commercial (+42.3 percent m-o-m) and institutional (+30.2 percent m-o-m) permits.

In y-o-y terms, building permits increased 10.6 percent in September.

In the third quarter of 2020, the value of building permits jumped 16.5 percent, almost returning to levels seen in the fourth quarter of 2019. This was the largest gain since the fourth quarter of 2009 when the economy was recovering from the 2008 financial crisis.

• We are seeing second wave take hold in Europe
• UK GDP forecast to fall 10.4% in 2020, grow 5.7% in 2021
• Continued UK policy support essential to address pandemic and invigorate recovery.
• IMF supports UK's additional fiscal push
• Tools like negative rates can be brought in UK after further understanding is developed on when they would be most useful
• Some adjustments in UK tax rates appears inevitable
• Fiscal consolidation should only happen once private sector has durably picked up steam
• Essential for UK to stabilise then reduce public debt ratios
• Strongly encouraging the UK and the EU to make every effort to reach Brexit deal
• UK faces downside risks related to prolonged COVID-19 impact and no-deal Brexit

The National Association of Realtors (NAR) announced on Thursday its seasonally adjusted pending home sales index (PHSI) fell 2.2 percent m-o-m to 130.0 in September, after an unrevised 8.8 percent m-o-m climb in August.

Economists had expected pending home sales to advance 3.4 percent m-o-m in September.

On y-o-y basis, the index jumped 20.5 percent after a revised 24.3 percent climb in August (originally a 24.2 percent m-o-m surge).

According to the report, three of four regional indices recorded declines in contract activity on a m-o-m basis in September. Pending home sales in the South dropped 3.0 percent m-o-m to an index of 150.1 in September, up 19.6 percent from September 2019. The PHSI in the West decreased 2.6 percent m-o-m to 116.8, up 19.3 percent from a year ago. In the Midwest, the index plunged 3.2 percent m-o-m to 120.5 last month, up 18.5 percent from September 2019. Meanwhile, the Northeast PHSI rose 2.0 percent m-o-m to 119.4 in September, a 27.7 percent advance from a year ago.

"The demand for home buying remains super strong, even with a slight monthly pullback in September, and we're still likely to end the year with more homes sold overall in 2020 than in 2019," noted Lawrence Yun, NAR's chief economist. "With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future."

• Says incoming data signals that recovery losing momentum faster than expected
• Containment measures weigh on activity
• Consumers are cautious in light of pandemic
• Cites clear deterioration in near-term outlook
• Says uncertainty about outlook weighs on investment
• Commits to keeping programs in place at least until covid is over
• Says economic developments are uneven in different sectors
• Recent hard data, surveys point to significant softening in activity in Q4
• Headline inflation to remain negative until early 2021
• Near-term price pressures to remain subdued
• Recovery in demand to put upward pressure on prices
• There should be no delay in next-generation EU package
• Policy change was not discussed at this meeting
  
• Recalibration means looking at all our instruments; don't assume it will be one instrument, we will look at them all
• We acted for the first wave, we will act for the second wave
• Emphasizes unanimity in the Governing Council to take action at the next meeting
• Q3 GDP data might surprise on the upside"
• Q4 growth will be on the downside
• November expected to be very negative
• We will be very attentive to impact of pandemic on risks
• Banks are anticipating tighter lending conditions

Germany's Federal Statistical Office (Destatis) reported on Thursday the country’s consumer price index (CPI) is expected to edge up 0.1 percent m-o-m in October after dropping 0.2 percent m-o-m in the previous month.

On the y-o-y basis, Germany’s CPI is seen to fall 0.2 this month, the same pace as in September. That remained the biggest decline since January 2015, influenced, among others, by the value-added tax reduction effective as of 1 July 2020. 

Economists had predicted inflation would be unchanged m-o-m but decrease 0.3 percent y-o-y in September.

According to the report, food price growth accelerated to 1.6 percent y-o-y in October from 0.6 percent y-o-y in September, while energy prices fell 6.8 percent y-o-y after a 7.1 percent y-o-y drop in the previous month. Services costs rose 1.0 percent y-o-y in October, the same pace as in September.

Meanwhile, the harmonized index of consumer prices for Germany (HICP), which is calculated for European purposes, is expected to be flat m-o-m and to fall 0.5 percent y-o-y. 

U.S. stock-index futures rose on Thursday after data showed that the U.S. economy grew at a record pace in the third quarter.

Global Stocks:

FXStreet notes that S&P 500 has seen a sharp fall on high volume, breaking below the uptrend from June to increase the risk that the market may be forming a double top. Only below 3209 the index would see the double top confirmed, but if seen, it would open the door for a move to the 200-day average at 3130, per Credit Suisse. 

“The S&P 500 has gapped sharply lower on markedly increased volume for a break below its uptrend from mid-June and whilst the market remains in its range from September for now, current price action increases the risk we may now in fact being seeing a more important topping process. This is seen reinforced further when we look at the weekly RSI momentum which looks to be already holding a large ‘head & shoulders’ top should we close the week at these levels, which is clearly concerning given momentum tends to be a leading indicator.” 

“Whilst resistance at 3306/11 caps the immediate risk is thus seen lower with support below 3269 seen at 3228 next, then more importantly at 3209/3199, which includes the key September low. Whilst we look for an attempt to hold here, a clear and closing break would suggest we have seen a significant top established, exposing the 200-day average, currently at 3130.” 

(company / ticker / price / change ($/%) / volume)

The European Central Bank (ECB) left its main refinancing rate unchanged at 0.00 percent on Thursday, as widely expected. Its interest rates on the marginal lending facility and the deposit facility were also left unchanged at 0.25 percent and -0.50 percent, respectively.

In its policy statement, the ECB said:

• Governing Council will carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines and developments in the exchange rate;
• New round of macroeconomic projections in December will allow thorough reassessment of economic outlook and the balance of risks; on basis of this updated assessment Governing Council will recalibrate its instruments, as appropriate, to respond to unfolding situation and to ensure that financing conditions remain favourable to support the economic recovery and counteract negative impact of the pandemic on projected inflation path;
• Repeats that Governing Council expects key ECB interest rates to remain at their present or lower levels until it has seen inflation outlook robustly converge to level sufficiently close to, but below, 2% within its projection horizon;
• Purchases under PEPP will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions until at least the end of June 2021;
• Governing Council will reinvest principal payments from maturing securities purchased under PEPP until at least the end of 2022; future roll-off of PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance;
• Net purchases under asset purchase programme (APP) will continue at a monthly pace of EUR20 billion, together with purchases under the additional EUR120 billion temporary envelope until the end of the year;
• Governing Council will also continue to provide ample liquidity through its refinancing operations.

The Commerce Department released on Thursday its "advance" estimate for the U.S. gross domestic product (GDP) for the third quarter of 2020, which revealed the U.S. economy climbed more than forecast in the reviewed period.

According to the estimate, the U.S. real GDP grew at an annual rate of 33.1 percent q-o-q last quarter, following a record contraction of 31.4 percent q-o-q in the second quarter, reflecting continued efforts to reopen businesses and resume activities that were postponed or restricted due to COVID-19. That marked the strongest pace of growth in GDP on record.

Economists had expected GDP to expand by 31.0 percent.

According to the report, the advance in real GDP in the third quarter reflected gains in personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, and residential fixed investment, which were partly offset by declines in federal government spending (reflecting fewer fees paid to administer the Paycheck Protection Program loans) and state and local government spending. Meanwhile, imports, which are a subtraction in the calculation of GDP, rose.

The data from the Labor Department revealed on Thursday the number of applications for unemployment unexpectedly fell more than expected last week, as the U.S. labor market is continuing a recovery from its biggest shock in history, caused by the COVID-19 pandemic.

According to the report, the initial claims for unemployment benefits totaled 751,000 for the week ended October 24. That was the lowest level since the U.S. went into coronavirus lockdown in mid-March.

Economists had expected 775,000 new claims last week.

Claims for the prior week were revised upwardly to 791,000 from the initial estimate of 787,000.

Meanwhile, the four-week moving average of claims dropped to 787,750 from an upwardly revised 812,250 in the previous week.

Continuing claims declined to 7,756,000 million from an upwardly revised 8,465,000 in the previous week.

EUR fell against its major counterparts in the European session on Thursday as renewed lockdown measures in Europe's biggest economies suppressed risk appetite.  

Germany and France both announced strict restrictions on business and travel on Wednesday, while Spain declared a six-month state of emergency to curb the spread of the coronavirus. 

Investors worry that the imposed lockdowns could derail the region's economic recovery, adding even more pressure to ECB's policymakers as they prepare to announce their monetary policy decision at 12:45 GMT. Overall, it is expected that the ECB will keep its policy unchanged and will resist pressure to introduce additional stimulus at today's meeting, but it could pave the way for action at the end of the year.

FXStreet notes that the Governing Council of the European Central Bank (ECB) is having a monetary policy meeting this Thursday, and pressure mounts on policymakers to provide additional support to the battered Union. However, it seems unlikely that the central bank will act this time. The lack of any tangible policy deliverables diminishes the risk of a significant directional move in EUR/USD — particularly with the US election looming next week. TD Securities’ base case sees two-way risks around current levels while most other scenarios see spot contained within familiar ranges.

“Hawkish (25%): Refusal to recognise downside risks. Policy and press release unchanged. The ECB still views the economy as evolving roughly in line with base case forecast... No clear signal that ECB is considering further QE this year. EUR/USD at 1.1835.”

“Base Case (65%): Policy unchanged, door open to more QE in December. Policy and press released unchanged. Downside risks to growth have increased on the second COVID-19 wave. Underlying inflation has turned lower. Economy tracking closer to ECB's downside macro scenario from Sept, and ECB will ensure to calibrate stimulus with new staff macro forecasts in December. EUR/USD at 1.1750.”

“Dovish (10%): Announces PEPP extension now rather than waiting for December ECB pre-emptively announces that PEPP will be increased by ~ €500 B and run until end-2021... ECB acting preemptively as it recognises that the crisis will persist and have a major economic impact for longer than previously thought. EUR/USD at 1.1675.”

FXStreet reports that FX Strategists at UOB Group suggest that USD/CNH could extend the upside to the 6.7650-region in the next weeks.

24-hour view: “Yesterday, we held the view that USD ‘could strengthen further but overbought conditions suggest a sustained rise above 6.7450 is unlikely’. While USD strengthened as expected, it only touched a high of 6.7371. Conditions remain overbought but the current advance appears to have enough momentum for another push to 6.7450. For today, a sustained rise above this level is unlikely. Support is at 6.7110 followed by 6.6900.”

Next 1-3 weeks: “Upward momentum has improved and if USD were to break 6.7450, the next level to focus on is at 6.7650. Overall, USD is expected to trade with an upward bias as long as it does not move below 6.6750 (‘strong support’ level previously at 6.6600).”

FXStreet notes that AUD/USD has slided back to around 0.7050. Nerves are understandable ahead of next week’s massive risk events – Reserve Bank of Australia (RBA) and US election results on consecutive days. RBA easing steps should be priced but surely cap A$ rallies while further equity turbulence is likely into and in the wake of US Election Day but the aussie has potential to rebound on a Blue Wave outcome, per Westpac.

“...volatility seems assured even if we do get the market-preferred Blue Wave that would brighten the prospects for US fiscal support both short and medium-term. Such a prospect is one of the assumptions in our 0.75 year-end forecast.” 

“Q3 CPI was firmer than we expected but with the RBA placing greater emphasis on actual inflation, we are a long way from the 2-3%yr target – see across. The RBA’s rate cuts to 0.1% cash and 3 year are expected but uncertainty lingers over the shape of a new QE program.”

“Overall, we see risks of a break of 0.7000/10 support pre-election but scope for a sharp rebound if equities recover.”

FXStreet reports that economist at UOB Group Lee Sue Ann expects the RBA to pump in extra stimulus measures as early as next month in spite of the recent pick-up in inflation figures in the Aussie economy.

“Trimmed mean inflation, a gauge favoured by the Reserve Bank of Australia (RBA), came in at 0.4% q/q and 1.2% y/y, from the readings of -0.1% q/q and 1.2% y/y, respectively. The RBA's weighted median was up 0.3% q/q, up from 0.1% q/q reading in 2Q20. Compared to the same period one year ago, it was 1.3% y/y, similar to the previous quarter.”

“AUD’s response to the latest figures was relatively muted. Even though the upbeat data was a welcome development, expectations are that it will not deter the RBA from reducing its policy rates. After all, inflation is still well below the floor of the RBA’s 2-3% target band and, with the Australian economy only just emerging from recession, is set to stay sub-par for a long time to come.”

“We now expect the RBA to ease policy further by cutting the cash rate, 3-year yield target and TFF rate by 15bps to 0.10% (from the current historic-low of 0.25%). The remuneration on Exchange Settlement (ES) balances, which is already at 0.10%, is likely to be either unchanged, or cut slightly, so as to remain positive. We also expect the RBA to announce further QE purchases ahead. It is debatable as to whether the RBA will set a specific quantity target for the purchase program, since it is already setting a price target for the 3-year rate. Fixing both quantity and price targets may lead to unexpected challenges going forward. Meanwhile, it is worth noting that the RBA continues to remain reluctant on negative rates (‘empirical evidence on negative rates is mixed’) and to intervene in the exchange rate (‘AUD broadly aligned with its fundamentals’).”

Int'l Paper (IP) reported Q3 FY 2020 earnings of $0.71 per share (versus $1.09 per share in Q3 FY 2019), beating analysts’ consensus estimate of $0.49 per share.

The company’s quarterly revenues amounted to $5.123 bln (-8.0% y/y), roughly in line with analysts’ consensus estimate of $5.106 bln.

IP rose to $43.50 (+1.16%) in pre-market trading.

DuPont (DD) reported Q3 FY 2020 earnings of $0.88 per share (versus $0.96 per share in Q3 FY 2019), beating analysts’ consensus estimate of $0.75 per share.

The company’s quarterly revenues amounted to $5.100 bln (-6.0% y/y), beating analysts’ consensus estimate of $5.034 bln.

The company also issued guidance for FY 2020, projecting EPS of $3.17-$3.21 (versus analysts’ consensus estimate of $3.03) and revenues of $20.1-$20.2 bln (versus analysts’ consensus estimate of $20.18 bln).

DD closed Wednesday's trading session at $55.91 (-2.51%).

Visa (V) reported Q4 FY 2020 earnings of $1.12 per share (versus $1.47 per share in Q4 FY 2019), beating analysts’ consensus estimate of $1.10 per share.

The company’s quarterly revenues amounted to $5.100 bln (-16.9% y/y), beating analysts’ consensus estimate of $5.030 bln.

V rose to $181.20 (+0.18%) in pre-market trading.

FXStreet reports that strategists at Westpac attempt to assign probabilities around four possible outcomes to the current negotiations and its implications for the pound.

“A deal by mid November, approved by a special EC Summit, endorsed by EU Parliament’s 24-27 plenary session and ratified before mid-December. 45% chance and could see GBP lift 8-10%.”

“Agreement is elusive by mid-March but a deal is found by early December, approved by EC’s 10-11 December Summit, endorsed by EU Parliament’s 14-17 December plenary session. 35% chance and could see GBP lift 5-8%.”

“No deal but agreement to work together towards a standard third party FTA. GBP would likely side 5-8%.”

“Acrimonious no deal. Immediate fall into WTO rules with disorderly and disruptive customs, border controls and cumbersome bureaucracy. Under 10% chance. GBP would likely fall some 12%.”

Ford Motor (F) reported Q3 FY 2020 earnings of $0.65 per share (versus $0.34 per share in Q3 FY 2019), beating analysts’ consensus estimate of $0.18 per share.

The company’s quarterly revenues amounted to $37.500 bln (+1.4% y/y), beating analysts’ consensus estimate of $32.901 bln.

F rose to $8.15 (+5.84%) in pre-market trading.

Reuters reports that figures from the British Retail Consortium showed that prices in British shops fell more slowly this month than in September, reflecting the smallest discounting for non-food items since the start of the coronavirus pandemic.

The BRC said its shop price index showed a 1.2% annual fall in prices in October compared with a 1.6% drop in September

Food prices rose by an annual 1.2% in both months, but the fall in non-food prices slowed to 2.7% from September's 3.2%.

Official data showed purchases of non-food items exceed pre-pandemic levels last month, but BRC chief executive Helen Dickinson said she expected the squeeze on many retailers' profit margins to continue.

Amgen (AMGN) reported Q3 FY 2020 earnings of $4.37 per share (versus $3.66 per share in Q3 FY 2019), beating analysts’ consensus estimate of $3.74 per share.

The company’s quarterly revenues amounted to $6.423 bln (+12.0% y/y), roughly in line with analysts’ consensus estimate of $6.363 bln.

The company also issued guidance for Q4 FY 2020, projecting EPS of $3.02-3.37 (versus analysts’ consensus estimate of $3.52) and revenues of $6.31-6.71 bln (versus analysts’ consensus estimate of $6.63 bln). For the full FY 2020, it forecast EPS of $15.80-16.15 (versus analysts’ consensus estimate of $15.78) and revenues of $25.1-25.5 bln (versus analysts’ consensus estimate of $25.39 bln).

AMGN closed Wednesday's trading session at $216.38 (-3.17%).

According to the report from European Commission, in October 2020, the recovery of the Economic Sentiment Indicator (ESI), which had started in May, came to a halt in both the euro area (unchanged at 90.9 points) and the EU (unchanged 90.0 points). The Employment Expectations Indicator (EEI) turned negative (down by 1.8 points to 89.8 in the euro area and by 1.2 points to 90.4 in the EU). 

In the euro area, the ESI’s stagnation reflected weaker confidence in services and, more so, among consumers, which was counterbalanced by a continued recovery of industry, retail trade and construction confidence.

Industry confidence booked the sixth consecutive increase (+1.8), thanks to (another) marked improvement of managers’ appraisals of the current level of overall order books and slightly more benign views on the adequacy of the stocks of finished products. Services confidence (-0.6) halted the recovery it had embarked upon in June, as the deterioration of managers’ demand expectations since August intensified and the ongoing rebound in the appraisals of the past business situation and past demand lost steam. Consumer confidence (-1.6) slipped, as households reported growing concerns about the expected general economic situation and their expected financial situation, which were matched by more cautious intentions to make major purchases. Retail trade confidence continued its recovery (+1.7), thanks to brightening assessments of the past business situation and the adequacy of the volume of stocks, which were however partly offset by the third consecutive deterioration in the expected business situation. Construction confidence firmed (+1.1) thanks to improving employment expectations and slightly better assessments of the level of order books. Finally, financial services confidence (not included in the ESI) posted the first decline (-3.4) since the onset of its recovery in May.

According to the report from Bank of England, the mortgage market strengthened a little further in September. On net, households borrowed an additional £4.8 billion secured on their homes, following borrowing of £3.0 billion in August. This pickup in borrowing follows high levels of mortgage approvals for house purchase seen over recent months. Mortgage borrowing troughed at £0.2 billion in April, but has since recovered reaching levels slightly higher than the average of £4.0 billion in the six months to February 2020. The increase on the month reflected higher gross borrowing of £20.5 billion, although this remains below the February level of £23.4 billion.

The number of mortgage approvals for house purchase continued increasing sharply in September, to 91,500 from 85,500 in August. This was the highest number of approvals since September 2007, and is 24% higher than approvals in February 2020. Approvals in September were around 10 times higher than the trough of 9,300 approvals in May. Approvals for remortgage (which only capture remortgaging with a different lender) are slightly lower than in August, at 32,700, and remain 38% lower than in February 2020.

Net consumer credit borrowing weakened in September, with households making net repayments of £0.6 billion. The interest rate on interest-charging overdrafts increased by an additional 3.5 percentage points, to a new series high of 22.52% in September, while the rates on new consumer credit and credit card borrowing were little changed.

Reuters reports that according to the report from the Federal Employment Agency, Unemployment in Germany fell much more than expected in October, as the labour market in Europe's largest economy continued its recovery from the first wave of the coronavirus pandemic.

The number of people out of work fell by 35,000 in seasonally adjusted terms to 2.863 million. Economists had expected a smaller decline of 5,000.

The unemployment rate decreased to 6.2% in October from 6.3% in the previous month.

The number of people on short-time work schemes, which have shielded the labour market from the brunt of the pandemic, dropped sharply to 2.58 million in August.

FXStreet reports that according to economists at Westpac, the kiwi has potential for further downside to 0.6600 if global sentiment weakens further.

“The sharp reversal overnight lips the near-term outlook to negative, targeting 0.6600 over the next day or two.” 

“Further ahead, there’s plenty of event risk (and likely volatility) for the NZD over the next two weeks: NZ labour data, US election and RBNZ.”

“Multi-month, we expect risk sentiment to remain elevated into year-end, supported by unprecedented global central bank and government stimulus, and the USD to remain in a downtrend. That should see NZD/USD above 0.68 by year-end.”

According to the report from the Society of Motor Manufacturers and Traders (SMMT), UK car production fell in September, with output down -5.0%, to register the worst performance for the month in 25 years. Factories turned out 114,732 cars, a decline of some 6,000 units on the same month in 2019, as companies continued to wrestle with the uncertain economic and political environment and Covid-related challenging global market conditions.

Exports declined -9.7% in September to 87,533 units – some 9,500 fewer vehicles year-on-year, as shipments to key overseas destinations, including China, the EU and US fell -1.2%, -3.3% and -30.0% respectively. Production for the UK, meanwhile, climbed 14.5%, equivalent to a rise of 3,440 vehicles, largely a result of new models that were in ‘run out’ in the same month last year.

After the first nine months of 2020, UK car production has dropped -35.9% behind 2019 levels, with 632,824 vehicles built. The latest independent outlook forecasts factories to make fewer than 885,000 cars this year – the first time volumes will have dipped below one million since 2009

During today's Asian trading, the euro rose against the US dollar before the European Central Bank (ECB) meeting.

Most experts and analysts expect that the ECB will not change the parameters of monetary policy at the October meeting, but will signal its readiness to increase the amount of stimulus in December.

Economists and investors want to get a signal from ECB President Christine Lagarde that the regulator is almost guaranteed to take additional support measures before the end of this year, and will probably be disappointed if they do not receive such a signal.

Meanwhile, the Bank of Japan maintained its previous monetary policy parameters following a two-day meeting that ended on Thursday. The short-term interest rate on deposits of commercial banks in the Central Bank is left at -0.1% per annum, the target yield of ten-year government bonds of Japan is about zero.

At the same time, the Bank of Japan lowered its forecast for the country's GDP decline for the current fiscal year ending in March 2021 to 5.5% from the previously expected 4.7%, which is mainly due to a slower-than-expected recovery in demand for services. Japan's GDP growth forecast for the next fiscal year was raised by the Central Bank to 3.6% from 3.3% expected in July.

The ICE index, which tracks the dynamics of the us dollar against six currencies (Euro, Swiss franc, yen, canadian dollar, pound sterling and Swedish Krona), fell by 0.01%

eFXdata reports that Credit Agricole CIB Research discusses the potential outcomes for the coming US elections and the related scenarios for AUD/USD.

"1. A disputed election: here we use the 2000 disputed election between Al Gore and George W Bush as a template. AUD/USD was significantly higher three months after the 2000 election, but that was only after a significant dip amidst the political uncertainty generated by the disputed outcome. The easing of this political uncertainty led to a subsequent rally in AUD/USD.

2. A blue wave: we think that Democrat control of the White House, Senate and House of Representatives would be less market -friendly than a Donald Trump presidency and would thus weaken the USD and be subsequently positive for the AUD,". 

"3. Gridlock, in the form of one of two possible outcomes:  Republicans keep the White House and Senate; Democrats keep the House...This would be bad for the AUD...," CACIB adds.

FXStreet reports that analysts at Bank of America Global Research provide their expectations at what they expect from Thursday’s ECB monetary policy decision.  

"The ECB should express its concerns in this week's meeting, in our view. The COVID-19 situation is fragile, and the cold weather season has barely begun. It is unclear if recent restrictions are enough. Eurozone core inflation is likely to weaken further, in our view, from already historic lows. Brexit remains unresolved and the recovery fund could be questioned and delayed. We could do with certainty that more ECB support is coming in December.”

“Committees being tasked would be a very clear signal, but maybe that is expecting too much this week.”

"In this context, we do not expect much from the ECB this week. A signal for PEPP expansion in December should already be mostly priced in, with risks for disappointment. Any indication for open-ended and inflation linked-PEPP would be a market surprise, in our view, but again, the communication for such a move would be important to determine the EUR impact.”

EUR/USD

Resistance levels (open interest**, contracts)

$1.1837 (501)

$1.1816 (508)

$1.1800 (535)

Price at time of writing this review: $1.1755

Support levels (open interest**, contracts):

$1.1719 (1075)

$1.1700 (987)

$1.1676 (1648)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date November, 6 is 57373 contracts (according to data from October, 28) with the maximum number of contracts with strike price $1,1800 (4080);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3104 (2623)

$1.3063 (265)

$1.3036 (800)

Price at time of writing this review: $1.3005

Support levels (open interest**, contracts):

$1.2953 (826)

$1.2916 (249)

$1.2893 (650)

Comments:

- Overall open interest on the CALL options with the expiration date November, 6 is 33142 contracts, with the maximum number of contracts with strike price $1,3950 (3784);

- Overall open interest on the PUT options with the expiration date November, 6 is 26973 contracts, with the maximum number of contracts with strike price $1,2050 (2391);

- The ratio of PUT/CALL was 0.81 versus 0.80 from the previous trading day according to data from October, 28

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

RTTNews reports that Japan's central bank maintained its massive monetary policy easing as widely expected, but downgraded its GDP projection for the current fiscal year.

The Policy Board of the BoJ voted 8-1 to retain the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.

The bank will continue to purchase necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

The bank said that the economy is likely to follow an improving trend with economic activity resuming and the impact of the coronavirus waning gradually. But the pace is forecast to be moderate.

The economy is forecast to shrink 5.5 percent in the fiscal 2020, weaker than the previous outlook of -4.7 percent. Overall consumer prices are expected to drop 0.6 percent versus a 0.5 percent fall projected in July.

The growth outlook for fiscal 2021 was raised to 3.6 percent from 3.3 percent and that for 2022 to 1.6 percent from 1.5 percent.

Consumer prices are projected to rise 0.4 percent in the fiscal 2021 compared to the previous outlook of 0.3 percent. At the same time, the inflation outlook for the fiscal 2022 was retained at 0.7 percent.