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What’s priced in for the US election

  
  Analysis
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It’s 76 days until the election

Biden and Trump picture
The deadlock in US economic stimulus negotiations highlights the political risk for the US coming out of the election. The sides simply can’t compromise.
At this point, you have to assume that most Americas have made up their minds about Trump, Biden and how they will vote.
In normal times, a Biden win would be the consensus. National polls in the past week show him from +4 to +11. Of course, these aren’t normal times and no one has forgotten the surprise on election night in 2016. Even with that, it’s worth remembering that Clinton won the popular vote by about what was expected, it was that a handful of states surprised. Her polling average was also only about +3% and she never reached this kind of spread.
Here’s how BMO sees it:

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ICYMI – Yonhap on North Korea’s up to 60 nuclear weapons & world’s third-largest stockpile of chemical weapons

  
Analysis, Politics
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Yonhap (South Korean media) cited a U.S. Department of the Army report, “North Korean tactics” published in July.

  • “Estimates for North Korean nuclear weapons range from 20-60 bombs, with the capability to produce 6 new devices each year” 
  • “North Korea sought nuclear weapons because its leaders thought the threat of a nuclear attack would prevent other countries from contemplating a regime change” 
ps. I am expecting something from NK today:
  • North Korea says it will convene a high level meeting on Wednesday – matter of ‘crucial significance’
Kim’s ‘Mission accomplished’ grin:
Yonhap (South Korean media) cited a U.S. Department of the Army report, "North Korean tactics" published in July. 

‘Game changer’ COVID-19 test approved by the US FDA over the weekend

  
  Analysis
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The US FDA authorised the emergency use of a new saliva based laboratory diagnostic test for coronavirus.

 A key difference is the speed of the test, its being described as a ‘game changer’.
The sped allows more people to access rapid easily.
Stephen Hahn, the Food and Drugs Administration Commissioner:
  • “Providing this type of flexibility for processing saliva samples to test for COVID-19 infection is groundbreaking in terms of efficiency and avoiding shortages of crucial test components like reagents”
Its called SalivaDirect
  • has been tested amongst US National Basketball Association (NBA) players and staff
  • simpler, less expensive, less invasive than nasopharyngeal (NP) swabbing
  • yields similar outcomes as NP swabbing
Current testing:
The US FDA authorised the emergency use of a new saliva based laboratory diagnostic test for coronavirus.
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ps. For clarity, this is a test for the infection, not a treatment. That is clear above, but wanted to restate it.

Dollar reverses its course

  
  Analysis
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Seeing some dollar buying all of the sudden

The dollar has reversed back higher in the last 30 minutes of trading.
Seeing some dollar buying all of the sudden
The EURUSD is back down testing the trend line on the 5 minute chart. The 100 bar MA on the same chart has been broken, but the trend line continues to hold the support.
GBPUSD
The GBPUSD has moved down to test its 100 bar MA on the 5 minute at 1.30904 but is finding some support as well. It will take a move below to swing more of the bias back to the downside.

US weekly initial jobless claims 963K vs 1100K expected

  
  Analysis
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Claims fall below 1 million

weekly initial jobless claims
  • Prior was 1186K (revised to 1191K)
  • Continuing claims 15486K vs 15800K expected
  • Prior continuing claims 16090K
  • PUA claims 489K vs 656K prior
  • Full report
The total number of people claiming benefits for all programs was 28,257,995, down 3065K from the prior week.
This was the first time initial jobless claims were below 1 million in 21 weeks.

Trade the strong against the weak

  
Analysis, Forex
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NZD

One of the key trading maxims in the FX world is pairing strength against weakness.If you need a refresher on that concept please do check that out here. So, yesterday we had the RBNZ rate meeting which has given us a weak NZD bias. Going into the event a client was asking me what I was going to do before the RBNZ rate meeting. The answer was simple, wait. Waiting to for the central bank to show its hand. The RBNZ has now done that and that is what gives us a bearish bias.

Reasons for the RBNZ’s weakness

The RBNZ has launched a set of bearish policies extending its asset purchases programme and showing openness to negative interest rates. They increased their quantitative easing (LSAP) programme to $100bn and extended its length from 12 to 22 months. Furthermore, the RBNZ expressed a preference for a lower or negative OCR and a ‘Funding for Lending Programme’, while leaving all options on the table.

So, we now have a short to medium term NZD bearish bias, look to pair it with currencies as they show strength. Yesterday’s strong AUD employment data make AUDNZD longs appealing on pull backs.

NZD

India reports record daily new coronavirus cases of 66,999 in latest update today

  
  Analysis
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That brings the total confirmed cases in the country to nearly 2.4 million

India is among the countries that have been hit the hardest by the pandemic as the struggle to balance between the health crisis and the economic fallout is particularly stark.

As for the health crisis, the bright side is that over 1.6 million of those infected has recovered from the disease. However, the spread is still outpacing the number of recoveries:
India
At the start of July, India reported ~220,000 active cases in the country. That figure is now ~643,000. The only positive – if you really want to look at it that way – is that the mortality sits at just ~1.9%. That is better than the ~3.2% seen in Brazil and the US.
In the bigger picture, as long as the health crisis worsens in India, it will have an impact on the global economic situation in general. Before the pandemic, there have been talks that India’s share of global growth might rival that of US, China in the next decade.
They were already among the top five – some would argue top three – contributors of global growth over the past few years, so any major setback to India will also be a setback for the global economy in that sense.

OPEC lowers global oil demand forecast

  
Analysis, Crude
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The latest forecasts in OPEC’s monthly report

The latest forecasts in OPEC's monthly report
OPEC now sees 2020 world oil demand down by 9.06 mbpd compared to a drop of 8.95 mbpd in the previous monthly report.
They say the second-half outlook points to the need for continued efforts to support a rebalancing in the market through OPEC+ adjustments.
With that, they cut their forecast for OPEC crude by 400K bpd this year and 500K bpd in 2021. Part of that is due to higher non-OPEC supply.
Crude is unmoved by the news and up 59-cents to $42.20/barrel on the day.
The main worry for oil is that OPEC starts to ramp up production again. Non-OPEC producers are filling in gaps from the huge cuts and that’s not going to fly forever.

China reaffirms that US’ TikTok ban has nothing to do with national security

  
  Analysis
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Comments by the Chinese foreign ministry

US China
  • Beijing has been ‘consistent’ on trade deal
  • Declines to comment on further trade specifics
  • Says position on US sanctions is clear and consistent
  • Says US sanctions are irrational, groundless
  • Reiterates opposition towards ties between US and Taiwan
There’s nothing really new here as this has been China’s stance all along but it does reaffirm expectations that both sides have a lot more than just the Phase One trade deal to discuss if they were to meet later this week.

Russia president Putin says have approved first Russian-produced coronavirus vaccine

  
  Analysis
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Putin says that his daughter has been vaccinated from the coronavirus

Putin
  • Says that Russian health ministry has approved coronavirus vaccine developed by Moscow’s Gamaleya Institute
  • Says hopes Russia will start mass production of coronavirus vaccine
Take what you will and believe what you want from the headlines above, but this may lay the groundwork for other countries to start prepping their own “breakthroughs” sooner rather than later. As with everything related to the pandemic thus far, all it takes is for one country to set a precedent and the others will take that as an opportunity to follow.
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