The most volatile weeks of the year are ahead of us as we are nearing the US Presidential and Congressional elections on 3rd November. Voters in America are going to the polls amid the worst financial crisis since the Great Depression back in the 1930s, with a civil unrest, a global pandemic and the worst wildfires in the US history. The first Presidential Debate is taking place on Wednesday when President Donald Trump and Democratic nominee Joe Biden are scheduled to square off for the first time on stage.
The discussion is expected to be extremely heated as the topics covered are ‘The Trump and Biden Records’, ‘The Supreme Court’, ‘Covid-19’, ‘The Economy’ and ‘The Integrity of the Election’. Each segment will last about 15 minutes and the candidates will have two minutes to respond to questions from the moderator, followed by further discussion on the topic. If history is any guide, we can expect plenty of hits below the belt. Trump, known for his name-calling habit and somewhat questionable data points, will use this opportunity to undermine Joe Biden as corrupt and deteriorating in terms of mental health. Biden, on the other hand, has plenty of trumps (excuse the pun) given the subpar management of Covid-19 pandemic at the federal level.
Additional fuel is added to the flame on the topic of the Supreme Court nominee appointment. Namely, an iconic liberal Justice of the Supreme Court of the United States, Ruth Bader Ginsburg, passed away on 18th September. Supreme Court Justices are confirmed by the Senate based on nomination by the President, and have a lifetime tenure, unless they resign, retire, or are removed from the office. Given the importance of the appointment on the legislative policy for years to come, Democrats are determined to block this process until the Presidential Elections. Republicans used a similar delaying technique back in 2016 when Senate Majority leader McConnell blocked the hearings for Merrick Garland just prior to the Presidential Elections. A number of Republicans, including Senate Judiciary Committee Chairman Lindsey Graham, commented back in 2016 and 2018 that a Supreme Court nominee should not be considered in an election year. Trump, however, is determined to nominate a candidate potentially this week. What’s certain is that we can expect volatile markets until November.
New and existing home sales data published in the US did not disappoint – both were up 4.8% and 2.4% respectively and exceeding expectations by reaching 14-year high. Given that housing is such an economically sensitive sector from household wealth and employment perspective, stemming from construction and related services, these numbers are great indicators of the economic situation in the US. Notwithstanding the fact that 30-year mortgage rates have reached all-time low of 2.9% and that Covid-19 crisis has expedited the exodus of people from large coastal metropolitans to mid-tier cities in the US, housing data confirms that we are experiencing a V-shape recovery.
USD was up 1.6% this week at the back of positive housing data, weaker than expected manufacturing and services PMI data from the Euro Area, and the re-emergence of Covid-19 in European leading countries, as measured by DXY.
Please find the below report to read a more detailed analysis of key economic events this week!
Have a great trading week ahead!