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US election overshadows GDP growth

CAD - Canadian Dollar

Canadian GDP data came back higher than it’s expected forecast of 0.9%, showing that it grew 1.2% following a 3.1% increase in July. This is the fourth consecutive monthly increase since the steep drop in March and April which bodes well for the Canadian economy.

However, demand for the USD has pushed up the price of USDCAD to a one-month high on October 28. The runup to the 2020 US Presidential Election has driven volatility and demand for the USD.

Investor confidence in a ‘blue wave’ election initially priced in a Biden win. As polls fluctuated over the last week, there was no clear winner, and we saw volatility enter the market. It will be a big upcoming week for the USD with several key events coming up, the most prominent being the US Presidential Election on Wednesday.

While there is no guess how the dollar and equity markets will react to either a Biden or Trump win, many traders are expecting further major volatility.

Key Movers

Ongoing Brexit negotiations continued, and France played very hard ball in discussions. President Emmanuel Macron’s rhetoric has been stern and forthright, and now the European Affairs Minister Clement Beaune warned the British government to ‘play no games’ with only a ‘few days’ remaining to conclude Brexit negotiations with a deal. There is a sense that Prime Minister Boris Johnson has softened his stance a little in the last few weeks and a deal could be likely, which could benefit the pound. However, the risks of a no-deal Brexit remain very real, leaving us with volatility heading into the December deadline.

Johnson announced a month-long lockdown to combat the significant rise in coronavirus cases. The furlough scheme and some other financial incentives from the UK treasury are being extended, and schools and universities will remain open, unlike the first lockdown. Sterling opened this morning already under pressure from the news, which is bound to have a significant impact on economic activity heading into Christmas.

The AUD slid further down on Friday against the USD, in a much similar fashion as it had throughout the week ahead of the Royal Bank of Australia interest rate decision on Tuesday. There are expectations that the RBA will announce a second rate cut for 2020 lowering it to a record low 0.10% from 0.25%. We can also expect to see some further volatility with the US Presidential Election happening the day after.

Expected Ranges

EUR/CAD: 1.542 - 1.555 ▲

GBP/EUR: 1.710 - 1.727 ▲

AUD/CAD: 0.933 - 0.936 ▼

USD/CAD: 1.326 - 1.336 ▼