One of the most important trading weeks of the year has just started – the week ahead of the U.S. elections. Now that the final debate is over and more than fifty Americans already voted, the market looks for any possible clue regarding the possible winner and the market implications
The week is also full of central bank interest rate decisions. One of them, the ECB on Thursday, is of particular importance due to the surge in COVID-19 cases in Europe and the curfew in place in many European countries.
European Equities Start the Week Lower
European equities opened in the red across the board. The virus spread led to increased restrictions all over the continent. Spain declared an emergency state and imposed a curfew during the night. So did Italy, but with more drastic restrictions – bars and restaurants close at 18:00. France registered over 50k on Sunday, reflecting the size of the outbreak and painting a glooming economic picture, too, on top of the health problem.
Bank of Canada on Wednesday is expected to keep the rates and the monetary policy unchanged. The Canadian Dollar (CAD) stabilized lately due to the fact that the price of oil found an equilibrium level around $40.
The ECB on Thursday is the main event of the week for currency traders. Faced with deflationary threat, the ECB is poised to act via more quantitative easing and other measures destined to support the economy.
However, the market’s consensus is that the ECB will not act at this week’s meeting. Instead, it will act in December. The argument here is that the ECB may want to wait and see the U.S. elections outcome, what the Fed does next week, and then to act in December.
If we consider, though, the virus’ advance lately, then the ECB might be forced to do something else this week besides forward guidance. If that is the case, the Euro will be the currency to move the most.
Bank of Japan (BOJ) is also due this week. The JPY was one of the currencies that moved in tight ranges lately and performed the best during the crisis so far. Just like the BOC, the BOJ is not expected to bring any surprise this week.
Which leaves everything on the U.S. elections and the ECB on Thursday. As such, the main driver on the currency dashboard this week should be the EURUSD pair.