Following up on last week’s explosive news of President’s Trump’s positive COVID-19 test and subsequent hospitalization, it appears that the POTUS has recovered miraculously.
President Trump was hospitalized at Walter Reed National Medical Center on 2 October after showing mild symptoms. It should be mentioned that the President’s condition did not appear to be severe as he greeted his supporters outside the hospital from a motorcade drive-by. As per the White House physician Dr Sean Conley’s statement, the President was treated with a number of drugs, including experimental antibody cocktail Regeneron. This mix seemed to have done the job as President Trump left the hospital on 5 October, declaring he was feeling better than 20 years ago. Markets obviously liked Trump’s fast recovery – S&P500 was up 1%, while Nasdaq climbed 1.3% higher on the day. US Dollar declined modestly by 0.4% and gold gained 0.7% on 5 October. Gold and equities tend to have an inverse relationship with the strength of USD – whenever dollar gains, equity markets and gold (in fact commodities in general) tend to decline.
The optimism in markets was hampered by subsequent tweets from the President calling off stimulus talks until after the election. House Speaker Nancy Pelosi had put forward U$2.2 trillion stimulus bill which Trump declared would ‘bailout poorly run, high crime, Democrat States’. The announcement came hours after the Federal Reserve Bank chairman Jay Powell had warned of the risks if Congress provided too little stimulus in the form of fiscal support. Trump reversed his strong stance in follow-up tweets requesting a piecemeal stimulus to various sectors of the economy, such as for airlines, small businesses and private citizens. The situation developed further on Thursday in a head-spinning reversal when Treasury Secretary Steven Mnuchin, in a call with Speaker Nancy Pelosi, said President Trump was now interested in coming back to the table to discuss stimulus package sending equities markets up once again. What a rollercoaster and we are still 3 weeks away from the election day!
UK GDP print came out last week weaker than expected when month on month growth was 2.1% vs the expected 4.6%. GBP initially lost 0.6% during morning trading hours but recovered some of the losses by the end of the day. UK showed strong recovery during summer months when initial lockdown measures were being eased. A chunk of GDP growth stemmed from ‘Eat Out to Help Out’ scheme, aimed to support food and beverage businesses. However, the British government has imposed 10 PM curfew for bars and restaurants in order to curtail the spread of COVID-19. Bank of England has already cut its main lending rate to 0.1% and is expected to increase their qualitative easing programme next month. With Brexit looming on the horizon it sure looks gloomy for the United Kingdom. GBPUSD is at the time of writing near 1.3000 levels – price point that we first saw in July 2016, and which has remained an important resistance and support level since then. Price has tested 1.3000 resistance level a number of times since early September with no success to break out. GBPUSD volatility has been compressed since 5 October and we see a high probability move to near 1.2700 levels in the near term.
Please find the below report to read more analysis of key macro and economic events this week!
Have a great trading week ahead!