Daily Currency Update

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Retail demand down

USD - United States Dollar

US retail sales increased two-tenths of a percent and didn’t meet forecasted expectations in September. Demand for the US dollar was slightly down on the news, but demand has been more influenced by growing COVID-19 lockdowns.

In California, the nation’s largest state, Governor Gavin Newsom placed 94% of the state’s residents under the strictest category. Iowa also placed residents in a stricter lockdown.

The US dollar has responded with mixed results. Demand wobbled with the euro. EURUSD almost reached 1.19 overnight. USDGBP jumped over 1.325 in earlier trading. AUDUSD fell to 0.729 this morning. USD demand pushed USDCAD up past 1.31 overnight.

Key Movers

Both the euro and the Great British pound offered little to excite investors as Brexit talks fail to yield any concrete evidence an agreement will be reached. UK and EU officials have entered the final week of negotiations and while a deal is possible a gap in expectations on key sticking points, namely fishing rights, threatens to derail an 11th hour trade agreement. The euro bounced between 1.1815 and 1.1865. Sterling broke back below 1.32, trading between 1.3240 and 1.3170. We anticipate a trade agreement will be struck before the end of the month, affording a boost to both the GBP and EUR, however failure to reach a compromise opens the door to a sharp and swift correction. Worryingly for the EUR the EU’s shared COVID-19 rescue plan appears vulnerable as peripheral countries block the EU budget and distribution of funds. Any hiccup or delay in the delivery of the program will hurt the shared currency.

The AUD outperformed most major counterparts advancing against the JPY, CHF, Euro, GBP and CAD to start the week as markets continue to largely look past increasing COVID numbers in the US and Europe. While we have seen several wobbles in market sentiment amid overwhelming coronavirus infections investors have remained largely resilient and immune to the short-term headwinds. The focus remains on the longer-term outlook as vaccines make is possible to return to an open global economy. We are watching resistance at 0.7325 with a break above this handle opening the door for a push toward September highs at 0.74.

Expected Ranges

EUR/USD: 1.183 - 1.189 ▲

GBP/USD: 1.318 - 1.326 ▼

AUD/USD: 0.719 - 0.733 ▲

USD/CAD: 1.306 - 1.310 ▲