Trading Analysis Ahead of Non-Farm Payroll – 30th September 2020

Today’s Market Outlook 

World stocks fell and safer assets, such as the yen and dollar, found buyers on Wednesday after a chaotic first U.S. presidential debate and rising COVID-19 cases turned investors cautious, though strong factory surveys boosted China’s markets. 

President Donald Trump and Democratic rival Joe Biden battled fiercely over Trump’s record on the coronavirus pandemic, healthcare and the economy in a bad-tempered first debate marked by personal insults and Trump’s repeated interruptions. 

U.S. stock futures had nudged higher during the debate but then retreated as Trump cast doubt on whether he would accept the election’s outcome if he lost. 

S&P 500 futures were last 0.6% lower, with Dow Jones and Nasdaq 100 futures down by as much as 1%. 

The U.S. dollar crept higher and is set for its best monthly gain since July 2019, while the yen rose 0.2% to 105.50 per dollar, its strongest daily rise in nearly two weeks. 

Britain suffered a record collapse in economic output (GDP q/q/) in the second quarter of 2020 when COVID-19 lockdown measures were in full force, though the decline was slightly smaller than first estimated. 

Gross domestic product shrank by 19.8% in the three months to June, the Office for National Statistics said, slightly less than the initial estimate of a quarterly 20.4% crash but still more than for any other major advanced economy. 

The fall was the biggest since the ONS records began in 1955. Other data has suggested Britain is on course for its biggest annual fall since the 1920s. 

Britain’s economy had already shrunk by 2.5% in the January-March period as the country entered lockdown in late March. 

Output has rebounded in recent months, but the recovery looks to be fading with rising coronavirus cases and forecasts of a jump in unemployment as the government scales back job support. 

Due to regional spikes in COVID, much of Britain is under a partial lockdown which limits people’s ability to meet others not in their households – hitting the hospitality sector in particular – though schools and workplaces remain open. 
In Europe, the European Central Bank (ECB) President Christine Lagarde set the scene on Wednesday for changing the ECB’s strategy to align it with that of the Federal Reserve, possibly including a commitment to let inflation overshoot after it has been low for too long. 

Inflation in the euro zone has missed the ECB’s target, currently set “below but close to 2%” for years despite increasingly aggressive stimulus from the central bank, which has pushed its main interest rate below zero and bought more than 3 trillion euros ($3.51 trillion) worth of assets. 

In her first update on the ECB’s ongoing review of its strategy, Lagarde also opened the door to giving the central bank less time to achieve its elusive goal. 

The ECB is widely expected to follow in the footsteps of the Fed, which said last month it would aim for 2% on average, so that periods when prices grow too slowly need to be compensated by times of faster increases, and vice versa. 

This Wednesday afternoon more releases from the U.S are expected which means trading opportunities for the USD Crosses & Gold. 

Today’s High Impact Events

The times below are GMT+3. 

15.15 - ADP Non-Farm Employment Change (U.S.) 

Potential instruments to Trade: USD Crosses & Gold.   

15.30 – Final GDP q/q (U.S.)  

Potential instruments to Trade: USD Crosses. 

16.45 – Chicago PMI (U.S.)  

Potential instruments to Trade: USD Crosses.   

17.00 – Pending Hone Sales m/m (U.S.)  

Potential instruments to Trade: USD Crosses.   

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