The week ahead will be marked by developments regarding the health of the President of the United States (POTUS) and the negotiations for a new round of stimulus. After the NFP last Friday showed that the unemployment rate in the United States dropped below 8%, the economic focus shifts to the battle for the White House.
Slow Start of the Trading Week
The week started slow, with the market closely monitoring any news regarding the President’s health. So far, the stock market held pretty well, and the news that the President and the First Lady are infected with COVID-19 did not create a risk-off reaction as many would have thought. Is this a mature market or one that does not know what to make from such news?
Later in the North American session, we will see the ISM Non-Manufacturing PMI. The expectations are that the services sector in the United States expanded further, and the release is forecasted to come out at 56.3. Normally, the ISM Non-Manufacturing is closely watched as it is released before the NFP. Traders wait for the release and check the employment component so to form an idea about what the NFP will show. However this time, it comes one trading day after, so the possibility exists that it will be a non-event.
The Reserve Bank of Australia (RBA) sets the cash rate this week, as it always does so on the first Tuesday of a new month (excepting January). The AUD continues to be one of the strongest currencies on the FX dashboard, supported by high commodity prices and a steady economic recovery in China. On Tuesday’s decision, the RBA is unlikely to change something in its monetary policy.
In fact, all economic events this week are secondary in importance, despite ECB’s Lagarde speeches and even the Canadian jobs data on Friday. The upcoming elections in less than a month from now will hold the headlines, as so much uncertainty exists.
Will Trump be able to campaign? Is Biden already a winner? Can the election be postponed in case one of the candidates gets sick? These are the questions on the market participants’ minds, and the sooner we will have an answer, the better.
Until then, no one takes a risk, and trading positions are reduced to a minimum. Expect a slow trading week and long consolidation in most markets.