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21
Oct

UK and Canada CPI, Tesla Earnings, EIA Oil Data

calendar 21/10/2020 - 06:15 UTC

With the weakening dollar, not only major currencies like the euro or the pound sterling relatively improved in value. Emerging markets made also some advances. The USD/MXN pair fell to the lowest level in more than a month, while the USD/TRY pair continued to come down as well. In other currencies however, the Turkish lira is still close to its recent all-time low as seen in the chart of the EUR/TRY pair.

Bitcoin made some significant advances over the past 24 hours, managing to finally surpass the $12,000 threshold and by Wednesday morning getting closer to the high seen in August. Multiple other major cryptocurrencies including Ethereum and Ripple traded meanwhile almost unchanged.

After a mixed performance on Tuesday, major European and US equity index futures were trading somewhat higher by Wednesday morning with the markets reported to have still some hope that in the US new economic stimulus measures could be decided before the Presidential election.

On Wednesday inflation data can be expected from the United Kingdom and Canada. In the U.S. the Federal Reserve will publish its Beige Book report and the EIA data on oil stockpiles.

EUR/USD

The EUR/USD pair managed to quickly break out above the 1.18-mark on Wednesday, reaching a new one month high by Wednesday morning. While the overall weakened dollar was part of the equation in this move, the strong position of the common European currency might have been an even stronger factor as the euro also strongly improved against other major currencies like the pound sterling (GBP) and the Japanese yen (JPY).

The issue of Euro bonds which would represent for the first time in the EU’s history a collective borrowing of its member states at the markets was reported to be a success with total demand at €233 million significantly above expectations.

On Wednesday multiple ECB board members including President Lagarde will participate in panel discussions or hold speeches.

EUR/USD

Gold

As the dollar continued to weaken, the price of gold finally was able to recover clearly above the $1,900 mark, trading at a new weekly high by Wednesday morning. Other precious metals like silver and platinum also traded higher, while palladium prices improved by more than two per cent over the course of the trading session on Tuesday.

In theory a weaker US dollar could push gold and other US dollar traded commodity prices higher, as in this case such commodities become cheaper in non-dollar currencies. Interestingly enough during the past few days the 10 year US Treasury Note benchmark moved higher, at times yielding above 0.8% at a new four months high. At least in theory, a higher yield on securities perceived to be completely secure like US federal government bonds, would drive the price of gold lower as then the opportunity cost of holding gold which does not bear any positive interest by comparison increases.

Gold

WTI Oil

The price for a barrel of WTI crude oil jumped on Tuesday towards a new six-weeks high, supported by the overall positive sentiment in the market but also possibly due to the weekly stockpile data published by the American Petroleum Institute (API). While crude oil stockpiles marginally increased, there was a continued draw on gasoline and distillate stocks.

On Wednesday the Energy Information Administration (EIA) is publishing its weekly data on crude oil, gasoline and distillate stockpiles.

What could potentially also drive oil markets in the near term besides comments from OPEC countries on whether and how production cuts will look like in the following months, could also be the development of the novel coronavirus pandemic. Especially in Europe over the past days more and more countries moved towards more restrictive regimes, in some cases coming close to those restrictions in place during spring.

WTI Oil

US Tech 100

Overall market sentiment was quite mixed while it remains still unclear if the two political parties in the United States could come up with a new stimulus deal before the upcoming Presidential election. The US Tech 100 index closed slightly lower, while the more broadly oriented US 30 and US 500 indices ended the day with a small upside.

The stock price of the streaming platform Netflix tanked after the release of rather disappointing results for the past quarter with the company both missing set expectations on the increase of new subscribers and also the earnings per share, which only reached $1.74. While the company reported very positive growth in Asian markets such as Japan and South Korea, the total number of new additional subscribers grew less than expected by only 2.2 million.

For the social media app company Snap the earning season was quite a success with the stock price surging higher by a double-digit percentage after the company reported a fall in losses to just one cent per share (adjusted), while revenue and global daily active users (DAU) were better than expected. The DAU number was up from 238 million in the previous release to now 249 million.

On Wednesday multiple companies will publish their quarterly results. Among them will be the electric car maker Tesla but also Verizon, Crown Castle, Las Vegas Sands and others.

US Tech 100

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