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Europe set to recover, US jobs data in focus

Europe set to recover, US jobs data in focus

It was a mixed session in Europe as traders were concerned about the fact that President Trump called off the negotiations in relation to the planned coronavirus relief package.

On Tuesday, the US leader abruptly brought the discussions to an end and he added that the talks will resume after the presidential election which will take place early next month. The FTSE 100 closed fractionally lower, the CAC 40 posted a loss, while the DAX 30 registered a small gain.

Donald Trump called on Republicans and Democrats to work together to push for a $25 billion stimulus package for the airline sector. United Continental and Americans Airlines Groups both gained in excess of 4%. It seems that Mr Trump also promoted the idea of $1,200 stimulus payments to individuals.

Nancy Pelsoi, of the Democrats, said that it was a missed opportunity for a major relief package. It seems that the Donald hit the reset button on the discussions so he could try and be in control of the situation. US stock markets had a better reaction to the developments and the S&P 500 closed up over 1.7% - recouping the losses that were posted on Tuesday.

Equities markets in Asia are a mixed bag. The Nikkei 225 is in positive territory, while the Hang Seng is in the red. Indices in Europe are tipped to open higher.

US Vice President, Mike Pence, debated Kamala Harris – Joe Biden’s running mate. The event was more typical of a political debate than the Trump-Biden showdown. By-and-large, viewers felt that Mr Pence came out ahead. 

Last night, the Federal Reserve released the minutes from the meeting that was held last month. The update showed that central bankers expressed concern that the economic recovery could be hampered unless there is a robust fiscal response from the government. The announcement pointed out that lower income workers are likely to be the worst impacted. Traders were not too happy that the Fed minutes didn’t give more details about what economic circumstances would prompt the Fed to alter its policy.    

Seeing as traders were in risk-on mode as far as US stocks were concerned, the US dollar fell – recently it has underperformed when equities have outperformed. In late September, the US dollar index hit a two month high, and even though it fell yesterday, the uptrend since the start of September is still in place.

The dip in the dollar yesterday helped silver and gold. It is worth noting that gold suffered a sizeable fall on Tuesday so it was starting from a relatively low base.

UK-EU trade talks are still ongoing. Uncertainty persists in relation to what the relationship between the two sides will look like come January. Michael Gove was slightly optimistic is his update yesterday, but he made the point that the UK would rather no agreement unless it was an agreeable deal. David Frost, the UK’s chief negotiator, said that a deal is possible but so is a no-deal outcome. It is likely that we will be in for these types of updates for a while.

At 7am (UK time) German trade data for August will be posted and exports and imports are both expected to increase by 1.4%.

Andrew Bailey, the Bank of England chief, will be speaking at 8.25am (UK time).

US jobless claims are expected to drop to 820,000 from 837,000. The continued claims reading is tipped to be 11.4 million, which would be a fall from the 11.76 million in the previous update.  

EUR/USD – has been moving lower since early September and while it holds below the 50-day moving average at 1.1800, the bearish move should continue, and it might find support at 1.1557, the 100-day moving average. If the wider bullish trend continues, it should target 1.2000.  

GBP/USD – has been moving higher for over one week and if the positive move continues it should retest the 50-day moving average at 1.3029. A break below 1.2675 could put 1.2480 on the radar.   

EUR/GBP – since mid-September it has been edging lower and a break below 0.9000 might put 0.8864 on the radar. A rebound might run into resistance at 0.9157.    

USD/JPY – Tuesday’s candle was bullish, and if it holds above the 50-day moving average at 105.80, it could target 106.52, the 100-day moving average. A break below 104.94, should put 104.00 on the radar.

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