Global coronavirus outbreak is not showing signs of slowing – a number of countries, including France, the U.S., Germany and Italy have reported a new record of daily cases within the last couple of weeks.
The U.S. is in a dire situation as the cases reach a new high for a second straight day. Compared to the first wave back in April and May when the virus was rapidly spreading in coastal metropolitan areas, this wave is hitting mostly the Midwest states such as North Dakota, South Dakota, Wisconsin and Montana. All these states report the highest number of new cases per capita last week. Also, a number of states have reached record high hospitalizations– a statistic that most health experts are extremely worried about, given that timely and adequate access to medical resources is critical for those in risk groups. The public discussion about the mandatory mask policy is gaining momentum with authorities emphasizing the importance of slowing the spread of the virus as we are nearing winter season. Enforcement of such policy will be challenging though, given the reluctance of the American people to adhere to authoritarian policies. Partial lockdowns are also being discussed, especially during Presidential Debates as President Trump and Democratic nominee Joe Biden have different opinions on this topic. Donald Trump is very much against any lockdown, whilst Biden is promoting partial and measured restrictions. The impact of record new cases on asset prices has been relatively muted as the news flow in relation to the elections and stimulus bill has been dominating the markets. Gold futures were largely flat last week, attempting to break out from 1,920 resistance levels but closing near 1,902. US Dollar, measured by DXY index, was down last week by 1%.
Positive data was reported from the UK last week when retail sales picked up by 1.5% in September, vs the expectation of 0.4%, on a monthly basis. The Office for National Statistics reported that the rise in Q3 was at record pace of 17.4% between July and September. The spending was mostly discretionary in nature, similar to the US latest data, as people opened their wallets for clothing, shoes and dining out. DYI related services and goods did also well. It should be noted that this data is not inclusive of October numbers when curfews were implemented, forcing pubs to close at 10.30 PM. The Office of National Statistics also released September CPI data for the UK which was in line with expectations of 0.5% on an annual basis but slightly below monthly expectation (actual 0.4% vs expectation 0.5%). Any positive trend in inflation numbers is welcomed as the rest of Europe is still trying to fight with potential deflation. Deflation is dangerous as people perceive the value of money growing with time, and hence are reluctant to spend today. This introduces a dangerous spiral whereby businesses are unable to generate revenue and may start laying off workforce. GBPUSD gained 1% last week but that again can be attributed to positive Brexit news when European negotiators signaled a potential deal by mid-November.
Please find the below report to read more analysis of key macro and economic events this week!
Have a great trading week ahead!