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Will stimulus talks proceed?

USD - United States Dollar

A self-imposed deadline to help the American economy may pass today without agreement between the Democrats, Republicans and the current Administration. This morning, the US Dollar Index is down one third of a percent.

Speaker of the House of Representatives Nancy Pelosi, who’s legislative body has passed a $2.2 trillion stimulus package, has been working with Treasury Secretary Steve Mnuchin to come to an agreement. She imposed today’s deadline. As is politics, an agreement could come together should Republicans come to the table.

Markets have responded with mixed signals. Demand for USD is mixed. EURUSD climbed through 1.18. GBPUSD has bounced between 1.30 and 1.291. AUDUSD has teased the 0.70 barrier. And USDCAD is down half a percent since yesterday.

Key Movers

Britain sees no basis to resume trade talks with the EU, unless Brussels decides to become more willing to negotiate on the current roadblocks according to chief negotiator, David Frost. This sent GBP slipping. This may be a negotiation tactic, as both sides look to pressure the other into making the first move. With Johnson’s self-imposed deadline extended, the UK will have until December 31 to get their affairs in order and negotiate a deal.

The Eurozone posted a current account balance of €19.9 billion vs €16.6 billion prior to Tuesday morning, highlighting their optimistic recovery continues.

The Australian dollar edged lower through trade on Monday, underperforming despite broader US dollar weakness and ongoing CNY upside. The AUD gave up intraday highs at 0.7115 to touch session lows at 0.7060, forced lower amid growing expectations the Reserve Bank will loosen monetary policy and introduce new QE measures as early as next month. Having given up highs at 0.74 the AUD has come under increasing pressure after the RBA suggested it will cut interest rates by 0.15 basis points while introducing new bond buying in the 5-10-year sector of the yield curve. With the promise of looser monetary policy weighing on the currency and the risk narrative continuing to fluctuate short term, AUD upside may be hard won. The promise of an RBA policy announcement and the US presidential election opens the door to an interesting and possibly volatile trading session.

Expected Ranges

EUR/USD: 1.176 - 1.183 ▼

GBP/USD: 1.291 - 1.298 ▲

AUD/USD: 0.702 - 0.709 ▲

USD/CAD: 1.311 - 1.320 ▼