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The resurging strength of the dollar not only affected some major currency pairs like the GBP/USD, which traded again below 1.29 but also emerging and other markets. The USD/NOK pair continued to recover with the performance since Monday at times approaching -2.8 per cent at the peak.
While there is still a lot of uncertainty surrounding a possible new stimulus bill in the US, the increasing number of new novel coronavirus infections across the globe and especially in Europe could affect the markets as more and more European countries are stepping up their enforcement measures against the spread of the disease. Many key Asian indices followed the downtrend from the US and EU markets. However, this was not the case for all markets with some Chinese indices trading higher, in particular the Hong Kong 50 index, which might be even on track to close this week for the third consecutive time higher.
On Friday US data on retail sales, capacity utilization and consumer sentiment can be expected. The expiry of some key exchange traded options contracts on equities could also be something to watch out for during this trading session.
The EUR/USD pair fell on Thursday for the first time in two weeks below the 1.17-threshold. However compared to the previous day, the move was probably more driven by the strengthening dollar than the weakness of the euro itself, as the common European currency managed to improve against other majors including the pound sterling (GBP) and the Australian dollar (AUD).
The French consumer price index (CPI) indicated an even weaker inflation than anticipated with the annualized inflation in September now reported at zero. In the US import prices remained also depressed at 1.1 per cent annually. Export prices were however at -1.8 per cent less deflated than initially expected.
On Friday the EU’s and Italy’s trade balance and CPI statistics will be released.
Gold prices improved for the second day in a row despite the dollar also improving on Thursday. In theory and as multiple times observed over the past weeks, a strong dollar could put pressure of precious metal prices as this would also impact demand from non-dollar currency holders.
The prospects of an even bigger stimulus deal could be driving up perceived long-term inflation assumptions as the US President Trump urged the Republican controlled Senate to “go big”, which was understood as a go ahead for an even bigger stimulus bill than the $1.8 trillion currently under discussion.
On Friday US data on retail sales, industrial production and capacity utilization can be expected.
Initially the market looked like it would move towards a retracement in oil prices, as a barrel of WTI crude oil dropped again below $40. However, with the release of the weekly stockpiles statistics from the Energy Information Administration (EIA) the trend clearly reversed, with the futures contract touching the $41 mark after an unexpected sizable decline in distillates of 7.2 million barrels compared to the previous week.
The upside might have been still limited as there still be concerns about what policies now especially European countries will adapt to help reduce the renewed spread of the virus. Back in spring when the most restrictive measures were adopted, demand for oil especially from the transportation sector cratered, leading to the lowest oil prices on record.
On Friday the US Baker Hughes Oil Rig Count number will be published. While still significantly depressed compared to the activity in the sector last year, the number of operating oil rigs has been steadily rising over the past four reporting weeks.
By evening hours major stock index futures managed to recover the bulk of the previous intraday losses, leaving for indices like the US 500 even still the possibility that the week might close in the green for the third time in a row.
Sector-by-sector performance was quite mixed with energy companies’ stocks (US Energy ETF +1.18%) performing quite well, while biotech (-2.44%) and other tech sector stocks overall traded lighter.
Shares of Wall Street investment bank Morgan Stanley (+1.15%) closed higher, but despite clearly surpassing expectations with quarterly earnings of $1.66 reported and revenue surging towards $11.7 billion, the bank’s stock traded more or less in line with the performance of other stocks in the sector. As CNBC pointed out, some might have had quite high hopes for its performance especially after the strong results from Goldman Sachs (-1.38%) and Citigroup (+1.15%).
On Friday oilfield service provider Schlumberger will publish its quarterly results. Then on Monday Halliburton will also follow with its results.
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