What’s the trade if Trump steals the election this year?

re we looking at a repeat of the dollar melt up in 2016?

As Biden leads in the polls, almost everyone has been talking up the case for a ‘blue wave’ and what scenarios may take place should that happen.

The straightforward one being “buy everything, sell the dollar” of course, but there are some risks associated with that once the euphoria begins to fade.

Over the past ten months, I grew from thinking Trump would easily win this election to thinking that Biden should have this in the bag, judging by the lead in the polls. But now, I’m less confident of that outcome as we approach the home stretch.
I would still argue that the base case remains for a ‘blue wave’ but Trump winning once again and stealing this election is not within the realms of being unworldly, if you ask me.
As a trader, it’s best to be prepared for all outcomes and eventualities, so what is the trade if we do see another four years of Trump in the White House after next week?
Is it going to be the total opposite of the reaction if we see a ‘blue wave’ outcome?


AstraZeneca plans its vaccine test on 50,000 enrolment

AstraZeneca Plc has begun a large-scale human trial of its coronavirus vaccine in the US

Earlier reports said the company planned to test on 30K but the latest is it’ll be a test on over 50k. 30k in the US, 20k elsewhere around the globe.
In the US the tests are being conducted with the assistance of the University of Wisconsin School of Medicine and Public Health as one of the sites for the human trials. The plan is to begin trials with the volunteers on Tuesday, with tests to accelerate following the September 7 US Labor Day holiday.
How the tests will be conducted, in brief:
  • adults aged 18 years or over
  • from diverse racial, ethnic and geographic groups who are healthy or have stable underlying medical conditions, including those living with HIV, and who are at increased risk of infection from the SARS-CoV-2 virus
  • participants are being randomized to receive two doses of either AZD1222 or a saline control, four weeks apart
  • twice as many participants receiving the potential vaccine than the saline control
  • trial is assessing the efficacy and safety of the vaccine in all participants, and local and systemic reactions and immune responses will be assessed in 3,000 participants.
  • late-stage clinical trials are ongoing in the UK, Brazil and South Africa and trials are planned to start in Japan and Russia.
Adds the company (bolding is mine):
  • Results from the late-stage trials are anticipated later this year, depending on the rate of infection within the clinical trial communities.
  • In July 2020, interim results from the ongoing Phase I/II COV001 trial were published in The Lancet and showed AZD1222 was tolerated and generated robust immune responses against the SARS-CoV-2 virus in all evaluated participants.
AstraZeneca Plc has begun a large-scale human trial of its coronavirus vaccine in the US

Are climbing bond yields about supply or demand?

US Treasury yields climb ahead of auctions

US Treasury yields climb ahead of auctions
It’s a big week in the Treasury market with record-high sales starting with three-year notes today.
With that, Treasury yields have jumped higher. US 10-year notes are up 6.4 bps to 0.6415% today. That’s after hitting a low of 0.5036% last week. The turn in the market came on the refunding announcement as coupon-issues were upsized and now we’re left to ponder what the latest move means.
The optimistic take is that this signals improvement on the virus and the economy. The other side of the argument is that a flood of bonds is going to push up rates.
I’m more sympathetic to the optimistic side, if only because Trump’s executive orders mean that more stimulus spending is less likely and will probably be lower. At the same time, a capital gains cut would blow another hole in the budget.
What does it mean for the US dollar? It’s positive.
BMO today highlights that even at 0.16%, US three-year notes are relatively attractive.
While the past few sessions’ concession will aid the takedown of this afternoon’s offering, at just 16 bp, 3-year yields are not abundantly cheap on an outright basis. However, when compared to overseas yields that have pushed to extremely negative territory, there is an argument to be made that the still-positive nominal rate on Treasuries will increasingly drive foreign interest.
At the same time, they see this latest move as more about supply than a ‘fundamental rethink’ of the econoy.
So the overall message from bonds right now is murky and it’s risky to take any big signals in mid-August.

Recap of the FOMC, “as expected” … but US Congress fiscal policy remains an unknown

Via CIBC Research on Wednesday’s FOMC policy statement.

“Today’s FOMC announcement unfolded largely as expected, with policymakers commenting that economic activity and employment remain well below where they stood prior to the pandemic, despite picking up somewhat in recent months. Indeed, the outlook has become increasingly uncertain since the last meeting on account of the surge in virus cases and the re-tightening of social distancing in many states, with the Fed noting that the path forward for the economy depends significantly on the virus which is expected to weigh heavily on activity in the near term. While the Fed stands ready to do more to support the recovery, as shown by the extension in several credit facilities beyond their initial deadlines, the fiscal support package being discussed by Congress remains an unknown” 

“As a result, they appear to have opted to wait for the September meeting, when the next set of forecasts are due, to provide more concrete forward guidance on future rate hikes by perhaps tying them to the outcome of a macro variable. Tomorrow’s Q2 GDP report will provide a starting point for assessing the scale of the output gap” 

Trump: Admin and Democrats are far apart on virus relief bill

You never know what the real state of play is

There have been so many positive and (mostly) negative reports from top officials about the state of play on negotiations. Ultimately, everyone believes in some kind of compromise and it could happen quickly. The congressional recess is Aug 6, so expect something right before that.
As for the near-term, expect Powell to offer several reminders to Congress to get moving.

Tokyo reportedly finds 266 new coronavirus cases in latest update today

NHK reports on the latest virus situation in the Japanese capital

That just reaffirms the narrative that the low count from yesterday was largely skewed by the ‘weekend effect’ and the fact that there was a long weekend in Japan.

The virus trajectory in Japan has not been encouraging since the start of the month, with the spread of infections already surpassing that seen during the initial outbreak. As of yesterday, Japan has recorded over 8,000 active cases – the most since early May.

For now, the government is still maintaining that the situation does not call for any extraordinary measures to curb the spread of infections but let’s see how long they can keep at this with the Olympics next year a key focus as well.

Economic data coming up in the European session

US equities snapped back to losses yesterday, though they finished off the lows at least. Futures are keeping mildly higher today but the overall mood remains more tepid as we start to move towards European morning trade.

The dollar is a touch softer but nothing significant, as major currencies are still keeping in rather narrow ranges for the most part today.
It is still going to be all about risk sentiment ahead of the weekend, so expect virus headlines to dominate once again to see if we can get more meaningful price action rather than the choppy back and forth we have been seeing since last week.
0900 GMT – Eurozone May construction output data
Prior release can be found here. Construction activity is expected to bounce back after bottoming out in April, but overall conditions should remain highly subdued still.
0900 GMT – Eurozone June final CPI figures
The preliminary report can be found here. As this is the final release, it shouldn’t have much – if any – impact to markets.
Also, at 0800 GMT we will be getting the latest ECB survey of professional of forecasters but it isn’t really much of a notable release.
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

Nikkei 225 closes lower by 0.76% at 22,770.36

A down day for Asian stocks

Nikkei 16-07

A poor day for Asian equities as profit-taking activity was the reason most alluded to for the drop after the Nikkei also touched a one-month high yesterday, not to mention the slump in Chinese equities as well.

Tokyo reporting a daily record of 280 new virus cases added to the softer tone in general too. The mood in US futures also isn’t helping, with E-minis seen down 0.4% currently.

The Hang Seng is down 1.1% while the Shanghai Composite is seeing losses of 2.3% now.
In the currencies space, this is seeing the dollar keep mildly firmer but nothing too significant as trading ranges remain relatively modest for the time being.

Moderna, S&P: Vaccine hopes

A look at vaccine developments and its impact on the stock market


FBSSource: Bloomberg

Yes, we’ve heard it already – both statements. Of course, from a humane point of view, it’s good to hear there is progress with the vaccine development. But it increasingly looks like by the time it is ready, most people indeed will already have immunity to the virus. In the meantime, Moderna is enjoying spikes of investor attention.

The latest update is that it got one step closer to the vaccine pushed its stock from the rage of $60 to $75. Needless to say, if the reports informed us tomorrow that another testing stage is cleared, we would see this stock already somewhere at its recently made all-time high above $85. Trajectory zone 2 would be the channel of movement in this case.

In fact, Moderna’s stock may well get to those highs anyways: fundamentally, the interest for anti-virus business will keep its momentum months or even years ahead, even if tomorrow is no virus at all. So Moderna will see its rise, just it will be a slow case scenario – the one that corresponds to trajectory zone 1.

S&P 500

For the stock market, the vaccine hope seems to be the only “joy” that keeps the optimism on the stage. With the S&P, currently, we are almost exactly at the previous high of 3 320, and in an obvious consolidation. Meaning, the market is not really sure what to look at more: still spreading infections in the US of the vaccine hopes. Today, it seems the latter is taking the upper hand. What the next step is going to be?

An optimistic scenario suggests we will see Trajectory 1 giving the green light to bulls and repeating the pattern of the previous upward wave the S&P followed in May. How probable is that? Quite probable, given that the reports about vaccine developments keep coming more often.

A pessimistic scenario as per Trajectory 3 suggests that we are actually at the tip of another “inside wave” which will bounce down from the resistance of 3 230. How probable is that one? Also very probable: clearing testing processes is good, but we don’t have the vaccine yet. It may take months before we finally see it.

A moderate scenario presumes that the market will overlook the absence of the vaccine and take on a more positive mood. That will be Trajectory 2.

The thing is that, indeed, it may be not until the very end of 2020 when the vaccine eventually gets done. Everyone knows that. If the S&P was only waiting for the vaccine to finally get developed, then it would be going sideways between 2 980 and 3 230 for months from now. Is that likely? No. Regardless of the vaccine process, the more we move into the future, the more the market becomes insensitive to the reality of infections and, therefore, independent from the vaccine hopes. Why? Because with the vaccine or without it, life goes on. And even the virus is now on the rise in the US – again – it will slow down pretty soon. So the question is not “if” but “when”. And the market is bored waiting.


This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice.

UK PM Johnson: We do think masks have a great deal of value in confined spaces

Comments by UK prime minister, Boris Johnson

Boris Johnson
  • We have got the virus under control across the country
  • It is very important to wear a face covering in shops
  • Will look at the guidance and say more in the next few days
Judging by recent remarks by the government, it is only a matter of time now before masks are surely going to be mandatory in shops across the UK.
In the US, Trump also wore a mask in public over the weekend but we’ll see if he will start doing so outside of the hospital. If so, that could mark a change of a stance and may help to create more health awareness in mitigating the spread of the virus.
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