· Dollar dips as Biden gains upper hand in tense U.S. election
The dollar slipped to its weakest level in more than two years against the yuan and eased against other Asian currencies as Democrat Joe Biden edged closer to the White House in a nail-biting U.S. presidential election.
Financial markets, however, were braced for days or even weeks of uncertainty as Republican incumbent President Donald Trump has opened a multi-pronged attack on vote counts in several states by pursuing lawsuits and a recount.
That could hamper the dollar in the short run, traders say.
The Federal Reserve, which is expected to keep policy on hold on Thursday, is also in focus as traders navigate market volatility in the wake of a knife-edge U.S. election that has pushed up the yuan and the Mexican peso.
Biden has claimed the pivotal Midwestern states of Wisconsin and Michigan. Late reporting showed the former vice president with a lead in Nevada and Arizona, while Trump held a lead in Georgia and Pennsylvania.
Expectations that a Biden administration would strike a slightly softer tone on trade policy is likely to weaken the dollar against the currencies of countries that often faced the threat of tariffs during Trump’s administration, analysts said.
The onshore yuan briefly rose to over a two-year high of 6.6381 per dollar, extending its recent gains as China’s currency has become a popular trade to bet on a Biden victory.
Emerging market currencies such as the Malaysian ringgit and the Indonesian rupiah also rose against the greenback.
The euro bought $1.1738 on Thursday, steady from the previous session.
The British pound fell 0.28% to $1.2957. Against the euro, the pound fell 0.34% to 90.56 pence.
The dollar was little changed at 104.28 yen.
Even if Biden manages to surmount the legal challenges from Trump to become the next president, Republicans look likely to retain control of the Senate and can use that to stymie Biden’s agenda – another complicating factor for currency traders.
Some analysts said Republican control of the Senate would prevent a Biden government from raising corporate taxes, which is positive for equities. However, a divided government also decreases the chances of big fiscal stimulus, which could be seen as a negative, other analysts said.
The Mexican peso, which had suffered from the Trump administration’s hard line on trade, gave up some of its 0.9% gain on Wednesday and fell back to 21.01 per dollar.
· Trump contests results with lawsuits and recounts as Michigan and Wisconsin vote Biden: CNBC After Hours
· As hopes fade for a major stimulus, here’s what it means for the fragile economy
As the question remains over who will capture the hotly contested presidential race, one casualty quickly emerging from fallout is the massive stimulus package Democrats were hoping to get to boost the economy.
A blue-wave victory in Tuesday’s elections was expected to cement funding as high as $3 trillion.
Instead, the likelihood that the Senate will stay in Republican hands, combined with a presidential race that at least is tilting to Democrat Joe Biden, likely translates into something smaller — or no deal at all.
· Fed wants low profile but may repeat that the economy needs stimulus
The Fed’s two-day meeting is expected to end Thursday with no new proclamations from the central bank, and Chairman Jerome Powell will be sure to distance himself from the election uncertainty.
But he is likely to be asked about one of the most pressing concerns in markets — fiscal stimulus to help the economy recover from the effects of the coronavirus. That topic has been a political hot spot, and it could be resolved in several ways depending on how the election turns out.
Strategists say the Fed will not address the election, which was unresolved as of Wednesday afternoon with the outcome in several key states uncertain.
Powell is likely to be asked about the need for fiscal stimulus, which Congress failed to provide ahead of the election. On Wednesday, Senate Majority Leader Mitch McConnell reopened the topic, saying it would be important to pass a package before the end of the year.
“Powell himself has made very clear that the most important thing is getting cash into people’s hands. I think he has to [comment], and I think it may be a market negative, given the fact that kind of rhetoric reinforces the limited effectiveness of the tools in the Fed’s tool box,” said Emanuel.
Fed officials have repeatedly called for stimulus but Powell may not address it, unless he is asked about it by journalists in his 2:30 p.m. ET briefing, strategists said.
· Bank of England holds interest rates and boosts bond buying by £150 billion as new coronavirus lockdown begins
Last month, the BOE asked British banks about their preparedness for negative interest rates, having revealed in September that it was exploring the possibility of taking rates below zero if necessary.
Along with maintaining its main lending rate at 0.1% he Bank of England’s (BOE) Monetary Policy Committee (MPC) also voted to expand its target stock of U.K. government bond purchases to £895 billion.
Since the onset of the coronavirus pandemic in March, the Bank has cut rates twice from 0.75% to 0.1% and launched a bond-buying program worth £745 billion ($965.1 billion).
The British economy grew 2.1% in August, according to figures released last month by the Office for National Statistics, having suffered an unprecedented 19.8% contraction in the second quarter during the height of nationwide lockdown measures.
· UK seeks to assure United States over Northern Ireland peace
Britain said on Thursday it wanted to assure any new United States administration that it would protect the Northern Ireland peace agreement in trade negotiations with the European Union.
“If there is a new administration I can assure them that that will be very much at the heart of what we wish to do, and any trade agreement will, of course, respect that,” justice minister Robert Buckland told Sky News.
· AstraZeneca expects COVID-19 vaccine data this year
AstraZeneca, the British drugmaker working on one of the world’s leading COVID-19 vaccine candidates, beat third-quarter sales estimates on Thursday and reiterated it expects data from late-stage trials of the vaccine later this year.
The company has taken on the development of Oxford University’s potential COVID-19 vaccine, scoring billions in funding and signing multiple deals to supply over three billion doses to countries around the world.
Data in October showed the vaccine, called AZD1222 or ChAdOx1 nCoV-19, produces an immune response in both old and young adults. AstraZeneca is expected to publish eagerly awaited late-stage clinical trial data in the coming weeks.
Expectations are that Britain could start rolling out a successful vaccine in late December or early 2021.
· German industrial orders disappoint due to sagging euro zone
German industrial orders grew less than expected in September as euro zone orders dropped, data showed on Thursday, highlighting the tough journey Europe’s largest economy faces towards recovering from the coronavirus shock.
Industrial orders rose 0.5% in September, less than the 2% analysts had expected, partly because bookings from other members of the currency bloc fell by 6%, offsetting expansion both in Germany and the rest of the world.
· Italy locks down financial capital Milan
· France, Germany and England impose new lockdowns as pandemic fatigue seeps in across Europe and Covid cases soar
· China considers 5% annual GDP growth target for next five years: sources
· Beijing bars arrivals from UK, Belgium due to second Covid-19 waves
China has imposed fresh travel bans on non-Chinese arrivals from Britain and Belgium, as it guards against a resurgence of the coronavirus by refusing entry to people from two of Europe's worst-hit nations.
· Australia orders more COVID-19 vaccines for total of 135 million doses
Prime Minister Scott Morrison said on Thursday the government will buy 40 million vaccine doses from Novavax NVAX.O, and 10 million from Pfizer PFE.N and BioNTech 22UAy.F.
That adds to the 85 million doses Australia has already committed to buy from AstraZeneca AZN.L and CSL Ltd CSL.AX should trials prove successful, taking the country's total anticipated outlay to A$3.2 billion ($2.3 billion).
· Indonesia suffers first recession in over two decades as coronavirus hits
Indonesia suffered its first recession in over two decades in the third quarter and millions of people lost their jobs over the past year as the COVID-19 pandemic battered Southeast Asia’s largest economy, the statistics bureau said on Thursday.
Gross domestic product (GDP) shrank by a slightly more than expected 3.49% year-on-year as household consumption fell while investment also dropped in the third quarter, official data showed. Economists in a Reuters poll had expected GDP to fall 3% after a 5.32% contraction in the second quarter.
· Oil down over 1% as markets whipsawed by U.S. election uncertainty
Oil dropped on Thursday as Democrat Joe Biden edged closer to the White House in a nail-biting U.S. presidential election but the Republicans look likely to retain Senate control, decreasing the chances of any huge COVID-19 relief package.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 64 cents, or 1.63%, to $38.51 a barrel at 0440 GMT, while Brent crude LCOc1 futures dropped 68 cents, or 1.65%, to $40.55 a barrel. Both contracts had jumped around 4% on Wednesday.
Biden predicted a U.S. election win over President Donald Trump after pivotal victories in Michigan and Wisconsin, while the Republican incumbent sought to offset a narrowing path to re-election with lawsuits and demands for a recount.
“The next few weeks could be quite tumultuous with looming court challenges and recounts,” analysts at RBC Capital Markets wrote in a note.
Reference: Reuters, CNBC
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