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Dollar drifts downward as investors cling to stimulus hopes By Reuters

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© Reuters. FILE PHOTO: FILE PHOTO: George Washington is seen with printed medical mask on the one Dollar banknote in this illustration taken

By Tom Westbrook

SINGAPORE (Reuters) – The dollar drifted toward a second consecutive weekly loss on Friday, as higher commodity prices and persistent hopes for U.S. stimulus supported investor sentiment and riskier currencies.

Talks have resumed between U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over coronavirus aid plans, two days after President Donald Trump ended them.

Limited progress kept dollar losses and other majors’ gains modest overnight, but the dollar eased 0.06% against a basket of currencies () and it is down 0.3% for the week.

The prospect of stimulus to support recovery in the world’s biggest economy has weighed on the dollar in the short-term by improving investors’ mood and their willingness to buy riskier assets such as stocks and commodity currencies.

Investors are also regarding improving chances of a Joe Biden presidency as increasing the likelihood of stimulus, since Democrats are pressing for the largest spending package.

“Market participants are travelling with the idea that a new round of U.S. fiscal stimulus is coming regardless, the uncertainty is more around whether it will happen before the election and how big it will be,” said Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:) in Sydney.

“Investor confidence is growing that Biden will win the Presidential election by a clear margin, reducing the risk that Trump disputes the result.”

The risk-sensitive Australian dollar rose 0.4% overnight and was steady early in the Asia session on Friday. It is flat for the week, despite analysts interpreting a Tuesday central bank statement as a signal of monetary easing to come.

The New Zealand dollar has mostly recouped Thursday losses made after another dovish signal from the Reserve Bank of New Zealand and was steady at $0.6586 on Friday.

The safe-haven Japanese yen has been sold with the upbeat mood and held steady just above a three-week low on Friday at 106.02 per dollar. It is down almost 0.7% this week.

The euro () was steady at $1.1763 and sterling was flat overnight and has held firm this week as prospects for a Brexit deal have appeared to improve. It was last at $1.2937.

Elsewhere, a 10% surge in oil prices this week, on optimism about stimulus and supply disruptions owing to a storm in the Gulf of Mexico and strike in Norway, has boosted oil-linked currencies.

The Canadian dollar is set for its best weekly rise in more than two months, adding 0.9% to C$1.3191 per dollar. The Russian rouble has also gained about 1% for the week.

China’s equity, commodity, currency and bond markets resume trade today after the Mid-Autumn holidays, and traders expect a jump in the onshore yuan to catch up with offshore gains.

” will move closer to ‘s current level of 6.74,” said Commonwealth Bank of Australia (OTC:) analyst Kim Mundy.

The yuan last stood at 6.7355 in offshore trade. The midpoint of its onshore trading band is fixed at 0115 GMT and trade begins a quarter of an hour later.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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XAU/USD at the Mercy of a Fiscal Stimulus Deal

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GOLD PRICE WEEKLY FUNDAMENTAL FORECAST: NEUTRAL

  • Gold outlook still hinges on stimulus deal expectations and corresponding swings in real yields
  • XAU/USD price volatility could persist as uncertainty surrounding fiscal aid and COVID-19 linger
  • Precious metals might stay supported more broadly as the Fed balance sheet hits all-time highs

Gold price action fluctuated within a 2% range over the last five trading sessions only to finish flat on the week. The precious metal continues to seek a bullish catalyst to fuel a breakout from its consolidation pattern, and in light of murkiness surrounding fiscal stimulus negations, gold prices could keep drifting broadly sideways.

GOLD PRICE OUTLOOK HINGES ON INFLATION EXPECTATIONS (CHART 1)

Gold Price Chart Inflation Expectations

Despite the notable rise in US Treasury rates over the last several weeks, the price of gold has largely kept afloat thanks to climbing inflation expectations. In fact, the 5-year forward inflation swap rate has jumped to 2.19%, which marks a fresh post-crisis high, and helps keep pressure on real yields. Inflation expectations rising faster than interest rates causes real yields to move lower, which is a bullish fundamental driver for gold prices.

Inflation expectations have potential to gain further ground with the prospect of another comprehensive fiscal aid package before the November 2020 election in focus. If US politicians can strike a stimulus deal, gold prices could stage an explosive move higher with inflation expectations.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 2% 2% 2%
Weekly 6% -9% 3%

Even if an agreement on stimulus cannot be reached prior to the election, inflation expectations could still stay relatively elevated if odds of a democratic sweep remain intact, as this would likely correspond with an even bigger stimulus deal early next year. That said, potential for a gridlocked congress could undermine inflation expectations and weigh negatively on gold price action.

GOLD PRICES SUPPORTED BY FED BALANCE SHEET GROWTH (CHART 2)

Gold Price Chart Fed Balance Sheet Total Assets

Resurfacing coronavirus concerns as new cases spike and governments reimpose restrictions on business activity presents another bearish threat to gold outlook. Yet, gold prices and inflation expectations could remain bolstered by Fed balance sheet growth. FOMC asset purchases have mounted and just pushed total assets held by the Federal Reserve to a new record high of $7.18-trillion.

Learn More – How to Trade Gold: Top Gold Trading Strategies & Tips

GOLD FUTURES PRICE WITH US DOLLAR INDEX OVERLAID (CHART 3)

XAU USD Price Chart Forecast Gold to US Dollar Index Correlation

Chart by @RichDvorakFX created using TradingView

Explosive Fed balance sheet growth, which is expected to continue at the current pace according to recent commentary from Fed officials, underpins the anti-fiat narrative and investor demand for gold. Correspondingly, the direction of gold might mirror the US Dollar Index due to the strong inverse relationship generally maintained by the two safe-haven assets.

Gold Forecast

Gold Forecast

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Gold prices could spike higher with potential for the US Dollar to weaken further if fiscal stimulus optimism can outshine skepticism. XAU/USD could decline, however, if the US Dollar strengthens as coronavirus concerns take hold and inflation expectations gravitate lower.

Learn More – US Presidential Election Timeline & Implications for Gold Prices

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight





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US Q3 GDP and Chinese PMI in Focus

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Copper Prices, US Q3 GDP, Chinese PMI, USDCNH – Talking Points

  • Copper eyes upcoming U.S. GDP, Chinese PMI Data
  • Election uncertainty a question mark for markets
  • Weaker Yuan may provide backstop to copper prices

Copper retraced a portion of its recent break higher over the previous two trading sessions. The COMEX futures price stands at $3.1405 (-0.41%) per pound as of Friday afternoon. Price action hit a 28-month high earlier this week following stronger than expected industrial production data out of China. Underlying market forces and Chinese economic strength amid the pandemic have bolstered the red metal’s gain to nearly 60% from the March lows.

Copper Futures (Daily Price Chart)

Copper Futures Chart

Chart created with TradingView

The recent pullback echoes across the broader group of metals with Gold and Silver both losing ground alongside copper in recent days. As the 2020 U.S. election nears – now only 11 days out – markets appear to be relatively calm. While Biden commands a lead in the polls, the outcome, along with election day aftermath remains uncertain. However, stimulus talks are one issue that could move the ball in the coming days, although hopes for a deal are quickly fading as the election quickly approaches.

Traits of Successful Traders

Traits of Successful Traders

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Traits of Successful Traders

That said, several high-impact economic events are slated for release next week, with the prime drivers likely being advance Q3 U.S. GDP and Chinese Manufacturing PMI. Economic growth in the United States is expected to cross the wires at 31.9% on a quarterly basis – a modern record. China’s economy, the world’s largest copper consumer, will look to record an eighth consecutive month of manufacturing growth. Positive data on either release may likely give a boost to the red metal.

DailyFX Economic Calendar

DailyFX Economic Calendar

Source: DailyFX Economic Calendar

Furthermore, a recent rally in the Chinese Yuan against the US Dollar may be supporting copper prices through a speculative function in markets. A weak USD is bullish for commodities in general; however, with China being the largest consumer of copper, a strong Yuan may serve as a particularly bullish backstop. Currently, USD/CNH is trading at 6.6676 – the weakest since July 2018.

Copper vs USD/CNH (Inverted) Daily Price Chart

Copper, USDCNH

Chart created with TradingView





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U.S. Treasury’s currency report likely delayed until after election: sources By Reuters

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© Reuters.

By Andrea Shalal

WASHINGTON (Reuters) – The U.S. Treasury Department is unlikely to release its long-delayed semi-annual report to Congress on international currency manipulation until after the U.S. presidential election on Nov. 3, a source familiar with the matter said on Friday.

The report was due in April, but its release has slipped repeatedly, initially due to the COVID-19 crisis and more recently given U.S. Treasury Secretary Steven Mnuchin’s focus on domestic fiscal stimulus negotiations.

The last report released by Treasury in January reversed the department’s designation in August 2019 of China as a currency manipulator. It included nine countries – Germany, Ireland, Italy, Japan, Malaysia, Singapore, South Korea, Vietnam and Switzerland – on its watchlist.

The U.S. Trade Representative’s office earlier this month opened an investigation into whether Vietnam has been undervaluing its currency and harming U.S. commerce, a charge that Vietnamese officials denied.

Vietnam has been on the U.S. watchlist given its trade surplus with the United States, a large current-account surplus and a perception that its central bank has been actively buying foreign currency.

The U.S. Treasury in August found that Vietnam’s currency was undervalued in 2019 by about 4.7% against the dollar due in part to government intervention.

Switzerland is at risk of being branded as a currency manipulator due to interventions by its central bank to curb the appreciation of the franc.

Thailand and Taiwan have also sparked concerns, said Mark Sobel, a former Treasury official who is now U.S. chairman for the Official Monetary and Financial Institutions Forum think tank.

He said there was a long history of Treasury missing deadlines for the reports under both Democratic and Republican administrations.

“It makes sense not to issue the report amid the heat of the elections and when Secretary Mnuchin is busy negotiating possible stimulus measures. He has bigger fish to fry,” Sobel said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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