Week Ahead – Markets Hate Uncertainty

Fundamental analysis of Forex market

Or so the old saying goes

You’re going to be hearing the word uncertainty a lot over the next month. We have political uncertainty ahead of what is going to be a highly unusual election, economic uncertainty as Congress fails to pass another relief package, uncertainty around Covid should the dreaded winter spike occur. Now we have Presidential uncertainty after Donald Trump became the latest world leader to test positive for Covid-19. “Markets hate uncertainty” is both a cliche and a fact. And we may see it a lot more over the next month, in particular.



Uncertainty reigns supreme after President Donald Trump and first lady Melania Trump tested positive for coronavirus.  Wall Street will closely watch to see how bad the virus spreads across Washington DC and if President Trump will have a mild or severe battle with the virus.

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Following a disappointing nonfarm payroll report, the last one before the election, the focus shifts to release of the Fed policy minutes for the September 16th policy decision. The Fed has clearly signaled rates will be near zero well into 2023, the minutes could show what they might need to see before they could raise rates.  With many signs that the economic recovery is losing steam, the Fed may have discussed increasing asset purchases.

US Politics

The vice presidential debate between California Senator Kamala Harris and Vice President Mike Pence will not be anything like the President Trump’s no-holds barred debate with former-VP Biden.  The democrats are growing confident they will take back the White House and given Biden’s age, he may only serve one term.  For many Americans, this will be their first look at Kamala Harris and this could be critical to see if she is the favorite to lead the party after Biden.

Biden is enjoying a comfortable lead in the national polls, but the lead is not as strong in the battleground states.  The chances are dwindling that Trump could steal the election but they still exist.


ECB minutes next week will be of interest, although with the central bank not showing any inclination to ease again this year, despite the rising Covid numbers and economic slowdown, I don’t expect the minutes will offer much in terms of new information. The comments on the exchange rate were the most interesting take away from the meeting itself but policymakers were quick to clarify.


Hopes earlier this week that common ground had been found on level playing field were short-lived and we now enter the final weeks of the negotiations with the major issues unresolved. High level talks between Boris Johnson and Ursula Von Der Leyen will commence on Saturday ahead of more meetings next week. It’s looking less likely that a deal will be agreed by mid-October, meaning these talks may well run into November, to the surprise of no one.


Winter has come early for the UK. The weather has turned, nights are drawing in sooner and Covid is on the rise meaning more restrictions and another hit to economic activity just as things were starting to move again. It’s another week of low-tier data, with an appearance from BoE Governor Andrew Bailey to add some interest. I’m not sure we’ll learn anything new though, with the central bank still considering negative rates but seemingly no closer to actually implementing them.


China on holiday until Friday.

Friday services and composite PMI released, expected to confirm China recovery remains on track. Sentiment dominated by the Trump Covid-19 situation and its evolution.

Hong Kong

Arrests continue under new security law. Ant Financial IPO announcement date likely to dominate headlines.


Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. India has become the no 2 infected country and over 5  million cases this week with no end in sight.

RBI rate decision postponed due a lack of members to make a quorum! This will further undermine confidence in India. Demonstrations continue over the agriculture reform bill.

Services PMI on tuesday expected to show India still marooned in contractionary territory.

New Zealand 

Pre-voting starts for New Zealand’s October 17th election. Market has priced in Labour clean sweep with movement in the polls that threatens unstable coalitions weighing on the NZ Dollar. A deterioration in the risk environment due to Trump’s Covid-19 illness will also weigh on NZD.


Busy data week with PMI’s Monday, RBA rate decision and trade balance on Tuesday, home loans on Friday. RBA will remain unchanged but the possibility exists of another rate cut to 10 basis points. A rate cut and talk of negative rates from RBA will see AUD move lower.

AUD and Australian equities as a pro-cyclical play, are acutely vulnerable to increased risk-off sentiment next week if the Trump/Covid situation deteriorates.


Heavy data week with services PMI’s, bank lending, household spending and machinery orders all expected to show Japan’s recovery is slow and uneven. BOJ Governor Kuroda makes speeches on Monday and Wednesday. Will be closely watched for signs of more easing to combat slowdown. Negative Yen, bullish Japan stocks.

Japan stocks are vulnerable to a deteriorating risk environment next week. Japan fund managers bought Yen heavily versus the US Dollar today after the Trump announcement. A deterioration in that situation will see the repatriation flows increasing pushing USD/JPY lower.



Oil prices are slipping again today, in line with the broader risk off move. While some will want to link this to the election, or the prospect of a Biden victory, I’m not really buying it. This is something that’s been building recently and the only reason it hasn’t materialised earlier is due to the warnings from the Saudi Energy Minister.

The simple fact remains that we’re heading into a worrying period for Covid and the impact on the global economy and oil demand will be significant. OPEC+ will likely be forced to hold a special meeting prior to December if they want prices to hold around $40.


Gold is continuing to push hard against $1,900 and is having a little success but it’s struggling to gather any significant momentum above these levels, which could be a sign of weakness. The jobs report didn’t cause too much of a stir for the dollar and so the impact on gold has been minimal.

If the yellow metal fails to secure a weekly close above $1,900, it may start next week on the back foot. The momentum indicators are favourable for the yellow metal and the jobs report hasn’t changed that. This will be a very interesting test and more downside may follow.

Economic Calendar

Saturday, October 3rd

  • The ruling U.K. Conservative Party 4-day conference begins

Sunday, October 4th

  • Czech regional elections expected

Monday, October 5th

  • Nobel prizes for 2020 are announced in medicine, physics, chemistry, literature, economics and peace.
  • Brexit in focus. The final formal round of talks is over, the British government expects trade negotiations to continue up to the EU summit in mid-October.
  • Turkey and Greece may resume exploratory talks over maritime disputes this week.
  • National Association for Business Economics (NABE) holds its 62nd annual meeting, virtually. The three-day event will focus on “Global Reset? Economics, Business and Policy in the Pandemic.” Chicago Fed Chair Charles Evans will speak.
  • Atlanta Fed President Raphael Bostic speaks at the Fintech South event on regulating financial technology.
  • South Africa’s ruling party continues meeting to discuss a proposed economic recovery plan.

Economic Data

  • U.S. ISM services, Markit services/composite PMIs
  • South Africa PMI
  • Thailand CPI
  • Services PMI: Euro-area, U.K.
  • Singapore retail sales
  • Turkey CPI

Tuesday, October 6th

  • Top diplomats from ‘Quad’ countries meet in Tokyo, seen as a democratic counter to China’s influence in the Indo-Pacific region. U.S. Secretary of State Michael Pompeo, Japanese Foreign Minister Toshimitsu Motegi, Australian Foreign Minister Marise Payne and India’s Subrahmanyam Jaishankar will attend.
  • The RBA Interest Rate Decision: No changes expected with its main policy programs and cash rate.
  • IMF Managing Director Kristalina Georgieva delivers IMF’s annual curtain raiser speech, previewing key issues for the IMF/World Bank meetings next week.
  • Fed Chair Jerome Powell and ECB Chief Economist Philip Lane deliver keynote addresses at the NABE conference.
  • Philadelphia Fed President Patrick Harker discusses machine learning via a webinar hosted by the Global Interdependence Center. Atlanta Fed President Raphael Bostic will speak to Leadership Florida about “An Inclusive Recovery.”
  • Bank of Mexico Governor Alejandro Diaz de Leon discusses the global economy with Dallas Fed President Robert Kaplan, via webcast.
  • ECB President Christine Lagarde participates in a panel discussion organized by the Bridge Forum Dialogue.
  • German Chancellor Angela Merkel speaks at a German industry event in Berlin.
  • Norwegian Central Bank Governor Oystein Olsen speaks in Oslo.
  • South African Reserve Bank will publish its six-month Monetary Policy Review.

Economic Data

  • U.S. trade balance
  • Australia trade
  • Germany factory orders
  • India services PMI

Wednesday, Oct. 7

  • Pompeo visits South Korea. Seoul is pushing for a resumption of stalled nuclear negotiations between President Donald Trump and North Korean leader Kim Jong Un.
  • U.S. Vice Presidential debate takes place in Salt Lake City. Vice President Mike Pence will square off with Joe Biden’s running mate, California Senator Kamala Harris.
  •  EIA crude oil inventory report
  • Fed Presidents Raphael Bostic (Atlanta), Neel Kashkari (Minneapolis) and Eric Rosengren (Boston) speak at a virtual event on “Racism and the Economy.”
  • New York Fed President John Williams moderates a discussion with Henry Kissinger, hosted by the Economic Club of New York. Williams will also discuss “Flexible Average Inflation Targeting” at an event hosted by Hoover Economic Policy Working Group.
  • Chicago Fed President Charles Evans discusses the outlook for the U.S. economy.
  • ECB’s Lagarde and Governing Council Member Francois Villeroy de Galhauspeak at the Paris Europlace conference.
  • IMF releases the analytical chapters of its World Economic Outlook: one on mitigating climate change and one on the economic impact of the great lockdown.
  • The minutes of the Sept. 15-16 meeting of the FOMC will closely be watched for hints on what conditions are necessary to trigger a rate increase. The minutes may also reveal whether policy makers discussed increasing asset purchases, continuing to restrict bank dividends, and allowing higher inflation and lower unemployment than officials previously had tolerated.

Economic Data

  • US FOMC meeting minutes
  • South Africa gross/net reserves, business confidence
  • Poland rate decision: Base rate to remain unchanged at 0.10%
  • Germany industrial production
  • Spain industrial output
  • U.K. house prices
  • Switzerland foreign currency reserves

Thursday, Oct. 8

  • BOE Governor Andrew Bailey, ECB Executive Board member Isabel Schnabeland Governing Council member Pablo Hernandez de Cos speak at the Single Resolution Board conference.
  • The ECB publishes the account of the monetary policy meeting of the Governing Council, held on Sept. 9-10.
  • Bank of Canada Governor Tiff Macklem gives a speech via videoconference.
  • Nigerian President Muhammadu Buhari may present his 2021 budget.
  • OPEC publishes the World Oil Outlook.

Economic Data

  • US initial jobless claims
  • Mexico CPI, central bank policy minutes
  • Bank of France industrial sentiment
  • UK RICS house prices
  • Hungary CPI
  • Canada housing starts
  • Japan current account balance
  • Norway GDP
  • New Zealand business confidence

Friday, October 9th

Economic Data

  • Industrial production: France, Italy, U.K.
  • Romania GDP
  • US Baker Hughes rig count, wholesale inventories
  • Canada unemployment rate
  • Japan household spending

Sovereign Rating Updates

  • Poland (S&P)