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While the equity markets overall turned lower on Tuesday, the dollar was able to make again some quite noticeable gains against other major currencies, with for example the GBP/USD pair falling by around one per cent during the trading session.
Emerging market currencies also were under pressure. The USD/TRY pair moved again clearly above the 7.9-mark, getting closer to the previous all-time high. One currency pair which was however practically not affected by this dollar-strength, was the South African rand (ZAR), as the USD/ZAR pair even moved lower that day.
While key equity indices ended the day clearly lower on Tuesday, oil prices at the same time recovered a sizable part of their losses from the day before and a barrel of WTI Crude Oil was by Wednesday morning again traded at just over $40.
European stock market index futures traded only slightly higher by Wednesday morning, following the decline in global equity markets during the previous day. The rapidly rising numbers of COVID-19 infections across Europe could affect the markets, especially if governments would increase restrictions in a renewed bid to contain the spread of the virus. It remains to be seen if lockdowns could be reintroduced as in the spring of this year. However, the WHO however recently reversed its recommendations concerning lockdowns, urging countries not to use them as “primary means of control of the virus”.
On Wednesday API oil market data will be released. Also multiple banks including Goldman Sachs and Bank of America will publish their quarterly results. Following the release of the US CPI, on Wednesday also Producer Price Index (PPI) data can be expected.
The strengthening dollar pushed the EUR/USD pair again clearly below the 1.18-threshold. While the common European currency traded almost unchanged against the Swiss franc (CHF) and the Australian dollar (AUD), the EUR/GBP pair managed to improve, while the EUR/JPY was clearly lower as the Japanese yen (JPY) was mostly stable to the strengthened dollar on Thursday.
German consumer price index (CPI) data indicated a sustained deflation at -0.2% compared to the same month of last year. In the US the CPI slightly improved in September, rising as expected towards 1.4% compared to the previous year. This is however still clearly below the average 2% target set by the Federal Reserve.
On Wednesday European industrial production data and the US Treasury Budget statistics will be released.
Gold prices fell again below $1,900 for one troy ounce and silver prices declined by four per cent within just one day. Palladium prices also continued to decline after the recent rally, also falling by almost four per cent just on Tuesday.
Factors affecting the markets could have been the strengthening dollar, which in theory would make purchasing such commodities in non-dollar countries comparably more expensive. An estimate by analysts from Goldman Sachs, sees on the other hand downside risks for the dollar, in case of a Democrats victory in the upcoming elections, while a possible vaccine could also affect the dollar value.
More fundamental data releases can be expected in the upcoming days, such as the Empire State General Business Conditions survey due on Tuesday or the industrial production statistic that will be out on Friday.
After a sizable decline in prices on Monday, oil traded again higher on Tuesday as Reuters attributed the move to the better-than-expected fundamental data coming from China. China’s exports continued to improve in September, rising by almost ten per cent compared to the previous month. The major surprise however was the strong increase in imports, which gained more than 13 per cent over the same period, reducing the trade balance surplus to $37 billion that month.
On Wednesday the American Petroleum Institute (API) releases its array of data for the week, which will include statistics on crude oil stockpiles changes. Then the Energy Information Administration (EIA) follows with its own data on crude oil, gasoline and distillates on Thursday.
Major US stock indices closed lower on Tuesday with banks (US Banks ETF -2.66%) and travel companies like Carnival (-7.64%) and Norwegian Cruise Line (-8.16%) trading significantly lower.
Citigroup (-4.75%) shares traded deep in the red, despite the company reporting better-than-expected revenue and earnings, while saying that credit cost have stabilized and trading revenues were up. On the downside, the bank’s revenue in its consumer banking declined and profitability was down by 34 per cent compared to the same quarter last year.
Apple (-2.79%) shares performance on Tuesday was significantly worse than that of comparable companies such as the FANG+ (-0.08%) index. While the company delivered the much-anticipated unveiling of its new iPhone 12 series and will offer devices in a wide price range to try to reach multiple segments of the phone market, some are worried that the entry level models have relatively small screens and the basic iPhone 12 with its 6.1 inch screen will start at $100 more than the previous model when it came out.
On Wednesday Bank of America, Wells Fargo, Goldman Sachs and US Bancorp will also present their quarterly results.
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