Stock market indices finished the week with a decline caused by a significant deterioration in the epidemiological situation in Europe and the United States, as well as uncertainty related to the outcome of the US presidential elections. The growing number of new daily cases of COVID-19 have been registered in 44 out of 50 states, and some European countries have been forced to tighten lockdown restrictions. Following France and Germany, the restrictions have been tightened by the UK, Portugal, Italy, and Austria.
US presidential elections will take place on Tuesday. The main risk is uncertainty and the likelihood of protests if one of the candidates challenges the election results.
The dollar strengthened last week due to the rising demand for safe-haven assets. EUR/USD dropped to a monthly minimum as a result of the strengthening dollar and the introduction of lockdown restrictions in a number of European countries.
The pound also remains under pressure. The next round of negotiations on a trade agreement between the EU and the UK will take place this week. The parties cannot reach a compromise on the regulation of fishing and the provision of state aid. On Thursday, the Bank of England will hold a meeting, at which a decision may be made to expand the quantitative easing program
The oil price fell to a 5-month low due to:
- the risks of new lockdowns on the background of a worsening epidemiological situation in the United States and Europe;
- reducing the demand for risky assets;
- resumption of oil production in the Gulf of Mexico;
- the growth of oil supplies from Libya.
Main events of the current week
- US presidential elections will take place on Tuesday. The Reserve Bank of Australia will hold a monetary policy meeting. RBA is expected to cut the interest rate from 0.25% to 0.1%. Data on employment change in New Zealand will be presented.
- On Wednesday, data on retail sales in Australia, UK Services PMI, ADP nonfarm employment change, US Non-Manufacturing PMI, and crude oil inventories will be released.
- On Thursday, the Fed and the Bank of England will hold a monetary policy meeting. Data on UK Construction PMI and US jobless claims will be presented.
- On Friday, data on the unemployment rate and nonfarm payrolls in the United States will be presented, as well as data on employment change and Ivey PMI in Canada.
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