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Gold & US Dollar Hold Ground Due to Risk of Elections Dispute

Gold & US Dollar Hold Ground Due to Risk of Elections Dispute

The RBA slashed interest rates while markets await the US election results.

The US president and Congress elections weigh heavily on market sentiment as investors prefer the wait and see approach. A clear result is always welcome regardless of the winner’s identity, yet the contested result’s scenario looks more likely after Trump’s multiple complaints about the mail vote. This storyline increases uncertainty and could lead to a further risk aversion sentiment.

The RBA has cut the interest rate from 0.25% down to 0.1% and announced the purchase of $100 billion of government bonds of maturities of around 5-10 years over the next six months. The RBA governor Lowe said that the combination of the bond purchase with a lower interest rate would assist the recovery by lowering financing costs and supporting asset prices and balance sheets.

Equities

Global stock markets have rallied on Monday on better than expected manufacturing PMI numbers in the US and Europe. The manufacturing PMI of October rose in the US to a nearly 17- year high amid increased demand for motor vehicles and food.

Stock Market

Change %

S&P 500

+1.2%

Dow Jones

+1.7%

NASDQ

+0.1%

Japan 225

+1.2%

DAX 30

+1.7%

FTSE 100

+1.2%

CAC 40

+1.9%

EUR/USD and Main FX Markets

The newly imposed lockdowns in Europe combined with the uncertainty of the US elections have kept the market’s risk appetite in check and kept demand for safe-havens. The US Dollar index hit on Monday a five-week high at 93.97. Therefore, the price could rally further towards 94.65 while above 94.04.

The EUR/USD rebounded from the low end of the current 1.1621- 1.1909 trading zone. The pair’s outlook is neutral while above 1.1621 and a close below this level changes the outlook to negative.

The GBP/USD retreated this week on news of imposing a partial lockdown in England. The pair’s outlook remains neutral while above 1.2772 and a close below that level changes the outlook to negative.

Gold and Oil

The Oil price retreated on Tuesday due to increasing Libyan supply and lower expectations of global demand caused by the second wave of COVID-19. Italy joined Germany, France, and the UK in tightening the coronavirus restrictions imposing curfews and travel bans between the most hit regions. The Brent Crude tested on Monday its lowest level in over four months at $36.38 the price could be on them for a test of $35.00 a barrel.

The Gold price rose on Monday by 0.8%. The precious metal outlook remains neutral while above $1,861 and a close below that level changes the technical outlook to negative.

Looking Ahead

The EUR/USD traders would follow the Bundesbank Mauderer’s speech at 10:00 AM (GMT) then at 4:00 PM markets will find out about the US factory orders of September. The Bundesbank members Balz and Maurderer will speak at 5:00 PM and 7:00 PM respectively.

This information/research prepared by Mahmoud Alkudsi does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk. The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest. The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.