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Planning the Trading Week Ahead

2 November 2020 By Mircea Vasiu

The most important trading week has finally arrived. The entire world keeps its eyes on the United States as it is about to elect its President for the next four years and the Congress representatives.

Plenty is at stake – from the fate of the USD in the short to medium term to the fiscal stimulus to help the country during the coronavirus pandemic. Financial markets traded in tight ranges for a few months, waiting for the outcome of the election. However, this week is not only about the American elections, as important economic data is due as well, not to mention that three central banks are about to announce their monetary policy decisions.

Volatile Markets Ahead

No important economic data is scheduled for today, with the exception of the ISM Manufacturing PMI in the United States expected at 55.6. As such, we will probably see a continuation of last Friday’s price action both for the USD and for the US stock market.

Tuesday, the Reserve Bank of Australia (RBA) announces the cash rate, but no change is expected from its decision. This is the day when the stock market prepares for the US elections outcome, as by the time the cash market closes, the futures will see increased volatility.

Starting with 00:00 CET, different states will release their results. The count begins with Florida, and then every hour sees more states reporting on the vote. Judging by the experience from four years ago, we might have a winner by the time European markets open on Wednesday. However, it is also possible to know who is going to be at the White House only in a few days and even weeks. It all depends on how tight the race will be.

One day after the elections, the Fed is scheduled to deliver its monetary policy and press conference. In other words, we may already know the new President and the structure of the Congress for the next four years by the time that Powell will hold the press conference. As always when there is a Fed decision, the USD’s volatility rises significantly.

On Thursday, the Bank of England might announce an increase in the quantitative easing program. The country will enter a new lockdown that day for an entire month, putting pressure on the GBP.

Finally, the week ends with the NFP, scheduled on the first Friday of every month. If the market knows the name of the new President by then, the focus will shift to the labor market and the unemployment rate.

Prepare for the most important trading week of the quarter!