Market Quick Take - October 8, 2020 Market Quick Take - October 8, 2020 Market Quick Take - October 8, 2020

Market Quick Take - October 8, 2020

John Hardy

Head of FX Strategy

Summary:  Equities continued their comeback, with the US S&P 500 Index fully recovering to close at a new local high after President Trump appeared to soften his stance on a stimulus package. Many tech companies rose despite the House Antitrust report while Europe remains bogged down in the range that has dominated for months. Brexit ultimatums are flying left and right but are barely inspiring any volatility in sterling as it seems the market believes an eventual deal will be struck.

What is our trading focus?

  • Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - the risk sentiment rebound has taken the broader market back higher to its highest close in nearly a month in the case of the S&P 500 while the megacap-heavy Nasdaq 100 has slightly underperformed. Flying somewhat below the radar is the fact that small cap stocks have been very strong over the last week and more and the Russell 2000 posted its highest closing level yesterday since the Covid-19 panic.

  • EURUSD and AUDUSD – the US dollar is firmly stuck in a rut in trading range terms, but has eased back lower toward the critical cycle support as a kind of mirror image of risk sentiment, which has improved since last Friday’s news of Trump testing positive for Covid-19. We watch for whether a move above 1.1800 in EURUSD and above 0.7200 in AUDUSD triggers more trading interest and an acceleration of the sell-off as this would point to the US dollar breaking down again.

  • AUDNZD – watching the NZD crosses today after a sharp, if somewhat modest sell-off overnight on comments from RBNZ Chief Economist Yuong Ha, who indicated an aggressive approach on providing further stimulus and said in an interview overnight that “We’d rather do too much too soon than too little too late.” The NZD has surprised somewhat with its resilience, given clear indication from the RBNZ that it is willing and actively preparing for a negative rate policy if needed. AUDNZD is back well above 1.0800 and needs to avoid slipping back below that level again for a look higher toward the 1.1000+ area that traded in the wake of the RBNZ’s initial dovish guidance.

  • Spot Gold (XAUUSD) and Spot Silver (XAGUSD) - continued to stabilize in Asian trading following Tuesdays' sharp drop. The U.S. VP debate overnight had no impact on a market focusing on whether the Democrats and the White House can find common grounds for a stimulus package. Polls increasingly pointing to a Biden/Harris win on November 3 (see below), an event the market believes may turbo charge the reflation trade through more stimulus spending and with that support for precious metals and commodities in general. Overall gold remains stuck in a wide range around $1900/oz with the market potentially not yielding a clear direction until after November 3.

  • Treasuries 30-year auction (30YUSTBONDDEC20). The bull flattener that we have seen as Trump ended stimulus talks was short lived. During the day of yesterday Treasuries bear steepened with the 2s10s widening by approximately 5bps and the 5s30 steepening only by 2.4bps. The yield on the 2-year Treasuries rose by 1 bps which was the highest change since August. The 10-year auction was well received. As the curve continue to steepen and inflation expectations are rising as well, we might witness to a weaker 30-year auction today.

  • EasyJet (EZJ:xlon) - reports preliminary earnings showing expected loss for the FY2020 (ending 30 September) of £815-845mn. Expects around 25% capacity utilization in Q1 FY21 (current calendar quarter). The UK airliner has told the government that it may need more help to weather the crisis. The company has suspended dividend and is not providing any guidance for FY21.

What is going on?

  • A very normal Vice-Presidential debate provided few headlines of note as the debate contrasted with the presidential debate with civil exchanges and a lack of the drama. As Harris avoided any notable gaffes this debate – the only one to be held by the two vice presidential candidates before the election on 3 November – is unlike to drive any shift in polling. In fact, some recent polls continue to show the Biden/Harris ticket gaining, with’s measure of the lead edging to nearly 10% now.

  • Chicago Wheat (WHEATDEC20) has reached a five-year high while Soybeans (SOYBEANSNOV20) trades at the highest since 2018, as dry weather threatens planting in both North and South America as well as the Black Sea area. Following the biggest quarterly surge in food commodities since 2016, the market will focus on twin insights from the USDA in its monthly WASDE report tomorrow and today the United Nations data on global food prices. It is likely to show another jump after hitting a six-month high in August. An unexpected decline in US inventories, strong U.S. export demand from China together with the growing concerns over La Nina are all potential strong forces that may support a grain and soy sector that has rallied by 23% in just two months.

  • Brexit brinksmanship fails to trigger much GBP volatility – the EU side tried to indicate it was calling the UK’s bluff on an October 15 negotiation deadline for a post-Brexit transition period deal, and French president Macron made aggressive comments on UK fisheries, but yesterday the EU negotiator Barnier asked member states to be flexible on fisheries, while UK Prime Minister Boris Johnson claimed he was ready to pull out of talks if his original October 15 deadline for an agreement is not met. All the while, GBP is treading water, suggesting that the market thinks this is just noise and a deal will eventually be struck. That view needs a key positive headline on agreement before October 15 it would seem.

  • Turkey says that 2020 Eurobond sale was oversubscribed by 3x. The country has reopened its 2025 bond issuance ahead of the US election. The bond priced in line with guidance price of 6.4%. The success of the bond sale is surprising because it comes as the country is planning to test Russian made missiles in defiance of US complaints. In our emerging market analysis, Turkey appear to be the riskier EM together with Argentina in term of default risk. Moody’s downgraded the country to five levels below investment grade last month.

What we are watching next?

  • 30-year Treasury auction today. As the US yield curve resumes its steepening, the market is preparing for the 30-year Treasury auction today. It will be interesting to see if there will be weaker demand for long term treasuries especially in light of the fact that yesterday for the 10-year Treasury auction we have seen less direct bidder, that were, however offset, by higher volumes of indirect bidders.

  • Hungary September CPI and 1-week Deposit Facility announcement today – before the Covid-19 crisis, Hungary’s currency the forint (HUF) was losing ground as inflation had risen to above 4.0% while the central bank policy rate was stuck near zero – meaning an alarming negative real interest rate for holders of HUF. In the wake of the crisis, the Hungarian CPI has been very quick to bounce back and even posted a 3.9% level in August. The HUF has staged a modest recovery after a small surprise 15 bps hike took the 1-week deposit rate to 0.75%, but Hungary and its neighbor Poland (struggling with the same issue) remain interesting countries to watch for the risk of negative real rates challenging their ability to avert further currency devaluation.

Economic Calendar Highlights for today (times GMT)

  • 0700 – Hungary Sep. CPI
  • 0800 – UN FAO’s Sep. Food Price Index
  • 0950 – Hungary Central Bank 1-week Deposit Facility announcement
  • 1100 – Mexico Sep. CPI
  • 1130 – ECB Meeting Minutes
  • 1215 – Canada Sep. Housing Starts
  • 1230 – Canada Bank of Canada’s Macklem to Speak
  • 1230 – US Weekly Initial Jobless Claims and Continuing Claims
  • 1315 – US Fed’s George (Non-voter) to Speak
  • 1430 – US Weekly Natural Gas Storage
  • 1610 – US Fed’s Rosengren (Non-voter) to Speak

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher


The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.