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It’s interesting how strong ‘risk-on’ trading has been over the past 3 to 4 weeks. The US dollar basket since the first Presidential debate has almost been in a downward linear trend that suggests the market is actually backing a change of administration at the White House.

DXY since September 28

However, there are a few issues outside of the US election that are creeping into the trades.

AUD/USD had been pretty steady around $0.7210 for a little while. However, news that China might be looking to freeze imports of coal from Australia broke the trend and knocked the pair to $0.7175. Australia’s economy has performed rather well through the COVID crisis and is likely to remain one of the better performing economies in the coming 12 months.

EUR/USD is also coming under pressure as the second wave in Europe builds to levels not seen since the March peak with Italy’s active cases rising to 5,901 from 4,619, France now has 21,329 active cases while the Netherlands announced a partial lockdown by closing bars, restaurants and cafes from Wednesday as its active case start to impact hospitalisations. All this has seen EUR/USD down to $1.1743, a 65-pip fall, in 24 hours and is showing further weakness.

GBP/USD is suffering from the same issue as the UK’s second wave sees a new tiered lockdown structure. Currently there are 17,234 active cases, however it’s the fact that cases are now growing at a rate not seen since March that has GBP/USD on edge (~5000 cases a day). Hospitalisations stand at 3,905 but that number is sure to increase. GBP/USD fell 1% to $1.2935 and will likely fall further if numbers continue to spiral and/or lockdowns get stronger.

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